The stock market managed to steady itself after hearing Federal Reserve Chairman Ben Bernanke's plans to dismantle the central bank's supports for the economy.
The Dow Jones industrial average closed with a loss of 20 points Wednesday after falling nearly 100 in early trading. Treasury prices fell as demand for safe havens eased.
Bernanke revealed the Fed's thinking on how to wean the market from emergency measures put in place to keep the economy afloat. He said the Fed will likely start tightening credit by boosting the interest rate it pays banks on deposits with the central bank.
The talk of a smaller role for the Fed in U.S. markets came as investors looked for the opposite overseas. Investors are hoping European Union countries will extend a bailout to Greece. The country is facing big budget gaps. There is concern that financial woes in Greece as well as in Portugal, Ireland and Spain could spread and threaten a global economic recovery.
"We're in a messy transition period," said Paul Ballew, chief economist at Nationwide Insurance in Columbus, Ohio. "While you see policymakers back off in some areas you're going to continue to see them intervene in other areas."
Officials said the EU member nations have made no decisions about how to help Greece. A gathering of EU officials is scheduled for Thursday.
The European debt problems have added to a series of economic problems that have stalled a 10-month advance in stocks. Investors have also been concerned about China's plans to curtail economic growth to avoid speculative bubbles. And they're uneasy about political matters, including President Barack Obama's calls to restrict trading at large financial institutions.
The prospect of a more restrained Fed shook the markets at first, although it wasn't a surprise.
Bernanke said in a statement the Fed likely will begin tightening credit by raising the interest rate it pays to banks on the money they have deposited at the Fed. That would lead to an increase in borrowing rates for consumers and businesses. The Fed chief said the central bank is not yet ready to boost interest rates, which stand at record lows.
Craig Kaufman, co-founder and head of capital markets at Kaufman Bros. L.P. in New York, said the Fed's plan is reasonable and didn't represent a shift in policy.
"We're sort of in this fake world and we need to show that we're moving back to a normalized process," Kaufman said, referring to the record-low interest rates.
The Dow fell 20.26, or 0.2 percent, to 10,038.38 a day after jumping 150 points as hope of a Greece bailout grew.
The broader Standard & Poor's 500 index fell 2.39, or 0.2 percent, to 1,068.13, while Nasdaq composite index fell 3.00, or 0.1 percent, to 2,147.87.
Bond prices slid for a second day after an auction of 10-year Treasury notes brought only modest demand. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.69 percent from 3.65 percent late Tuesday.
The dollar rose against most other currencies. Gold slid.
Crude oil rose 77 cents to $74.52 per barrel on the New York Mercantile Exchange.
Financial stocks rose after Legg Mason Inc. said its assets under management are higher than last year. The stock rose $1.37, or 5.5 percent, to $26.45.
Among companies reporting earnings, Dean Foods Co. fell $2.45, or 13.9 percent, to $15.19, after the dairy company said higher operating costs hurt its fourth-quarter results. The company's profit forecasts also fell short of analysts' expectations.
Shares of The Walt Disney Co. edged up 19 cents to $30.03 after the company's fiscal first-quarter earnings were about the same as a year earlier but above what analysts had predicted.
Advancing stocks narrowly outpaced those that fell on the New York Stock Exchange, where consolidated volume came to 4.3 billion shares, compared with 5.2 billion Tuesday. Analysts said volume was light in part because heavy snow along the East Coast kept some traders out of the market.
The Russell 2000 index of smaller companies rose 0.65, or 0.1 percent, to 595.82.
Britain's FTSE 100 rose 0.4 percent, Germany's DAX index gained 0.7 percent, and France's CAC-40 climbed 0.6 percent. Japan's Nikkei stock average rose 0.3 percent.