The Dow slipped and the S&P 500 edged up less than a point on Wednesday, interrupting a four-day rally, with investors trying to gauge when the Federal Reserve may scale back on its economic stimulus.
Minutes from the Federal Reserve's June policy meeting released on Wednesday afternoon showed many officials wanted more reassurance that the labor market was improving before reining in stimulus measures. Even so, consensus built within the Fed that there probably was the need to begin pulling back soon on its monthly bond buying.
The three major U.S. stock indexes recovered some ground immediately on the headlines following the release of the minutes. But those gains were short-lived as investors parsed the details of the minutes. The Dow closed slightly lower to break a four-day winning streak, while the broader S&P 500 eked out a tiny gain.
Investors appeared to be more encouraged by a speech from Fed Chairman Ben Bernanke that was delivered after the market closed. Bernanke said highly accommodative monetary policy is needed for the foreseeable future and that the U.S. unemployment rate at 7.6 percent may be overstating the job market's health.
Bernanke's comments sent U.S. stock index futures higher. The central bank has said it will continue buying bonds until the labor market outlook improves substantially.
"That is calming market fears," said Tim Ghriskey, chief investment officer of Solaris Group in Bedford Hills, New York, referring to Bernanke's comments on the labor market.
"Speculation that the tapering could be from September is now turning into, 'Maybe the Fed is going stay longer.'"
Bernanke spooked investors last month when he said the economy's expansion was strong enough for the central bank to start slowing the pace of its bond purchases later this year.
Some in the market have pegged September as when the Fed could potentially start pulling back, but the minutes suggested that was not a foregone conclusion.
The Dow Jones industrial average <.DJI> dipped 8.68 points, or 0.06 percent, to end at 15,291.66. The Standard & Poor's 500 Index <.SPX> inched up just 0.30 of a point, or 0.02 percent, to finish at 1,652.62. The Nasdaq Composite Index <.IXIC> gained 16.50 points, or 0.47 percent, to close at 3,520.76.
The S&P 500 <.SPX> has risen more than 2 percent over the past five sessions, pushing the benchmark index to just about 1 percent below its May 21 all-time closing high of 1,669.16.
With the Fed's quantitative easing program a significant driver of this year's rally in the stock market, the question of when and by how much the central bank could pull back has been a major focal point for investors.
After an initial selloff following Bernanke's comments in June, equities have taken a more positive tone in recent days on optimism that the economy is indeed on firm enough ground to justify slowing the $85 billion a month in bond purchases, known as quantitative easing, or "QE."
That view was reinforced by last week's stronger-than-expected jobs report for June.
"The fear was that the Fed would remove QE for non-economic reasons, like they were worried about bubbles or that the cost of QE was exceeding its benefit ... and that got the equity market nervous," said Paul Zemsky, chief investment officer of multi-asset strategies at ING U.S. Investment Management in New York.
"Now when you start to see employment numbers come in like the Fed's forecast had expected, then it's appropriate that they taper."
In the retail sector, Family Dollar Stores Inc shot up 7.1 percent to close at $68.50. The stock, which ended at a seven-month high, was the S&P 500's top performer after the discount chain posted quarterly earnings.
On the downside, Nabors Industries Ltd slid 6.3 percent to $14.99. The stock was the S&P 500's worst performer after the owner of the world's largest land-drilling rig fleet warned on Tuesday that its second-quarter operating profit would fall short of market expectations.
After the closing bell, Yum Brands reported a drop in June sales at restaurants in China, though the decline was not as steep as the month before. Its shares edged up 0.5 percent at $72.70 in after-hours trading. During the regular session, Yum Brands shares slipped 0.4 percent to end at $72.36.
Analysts expect S&P 500 companies' earnings to grow 2.6 percent in the second quarter from a year ago, while revenue is forecast to increase 1.5 percent from a year ago, according to Thomson Reuters data.
Volume was roughly 5.7 billion shares on the New York Stock Exchange, the Nasdaq and the NYSE MKT, compared with the year-to-date average daily closing volume of 6.4 billion.
Advancers outpaced decliners on the NYSE by a ratio of about 8 to 7. On the Nasdaq, advancers also took the lead, with seven stocks rising for every five that fell.
(Additional reporting by Angela Moon; Editing by Jan Paschal)