U.S. stocks opened higher on Tuesday after Federal Reserve Chairman Ben Bernanke said the U.S. economy appeared to have enough momentum to avoid a double-dip recession, while the euro edged up on profit-taking after the currency hit a four-year low against the dollar.
But stocks turned negative, led down by technology and consumer discretionary shares and investor concern with Europe's sovereign debt crisis.
U.S. Treasury bond prices were lower ahead of the first of this week's $70 billion worth of bond auctions, but gold prices hit a record dollar high as aversion to risk remains strong.
Bernanke, in comments at the Woodrow Wilson Center in Washington, also said European leaders were committed to ensuring the survival of the euro and had enough money to meet obligations of heavily indebted member nations.
"Markets remain nervous. So far today, Mr. Bernanke's comments have just sort of stopped us," said Frank Lesh, a futures analyst and broker at FuturePath Trading LLC in Chicago. "He stabilized the markets, if you will, for the time being."
The Dow Jones industrial average was down 1.28 points, or 0.01 percent, at 9,815.21. The Standard & Poor's 500 Index was down 0.54 points, or 0.05 percent, at 1,049.93. The Nasdaq Composite Index was down 15.44 points, or 0.71 percent, at 2,158.46.
Europe's FTSEurofirst 300 was down 0.67 percent, giving up an early rise. That pushed MSCI's all-country world stock index to pare gains.
DEFICITS AND SOVEREIGN DEBT CONCERNS
In currency markets, the pound fell after a ratings agency urged Britain to cut its deficit, making it the the latest salvo in a series of concerns expressed by rating agencies about the state of government finances in Europe, encompassing Greece, Spain, Hungary, and Ireland.
Fitch said "the scale of the UK's fiscal challenge is formidable and warrants a strong medium-term consolidation strategy — including a faster pace of deficit reduction than set out in the April 2010 budget."
Solving the debt problem implies heavy budget cuts at a time when many believe spending is needed to help keep economic recovery on track.
The euro's gains were slight, though, and analysts said the market remained anxious about debt levels in several euro zone countries.
With Portugal, Italy and Spain set to sell new bonds this week — the first sale for Spain since its credit ratings downgrade — investors were still wary of overexposure to the euro, keeping the currency capped below $1.20.
"The euro decline isn't over," said Marc Chandler, senior strategist at Brown Brothers Harriman in New York. "There are supply concerns this week, and what we're seeing now is a brief respite. A rise above $1.20 would be a good chance to sell."
The euro was up 0.12 percent at $1.1928 from a previous session close of $1.1914. Against the Japanese yen, the dollar was up 0.02 percent at 91.34 from a previous session close of 91.320.
U.S. Treasury debt prices were lower, with benchmark 10-year U.S. Treasury note down 11/32, yielding at 3.18 percent. The 2-year U.S. Treasury note was down 2/32, with the yield at 0.738 percent. The 30-year U.S. Treasury bond was down 25/32, with the yield at 4.13 percent.
The U.S. government will auction $36 billion worth of three-year notes at 1 p.m. (1700 GMT), followed by offerings of 10- and 30-year bonds later in the week.
Normally, bonds weaken ahead of auctions as dealers sell to make room on balance sheets and generally push for a price concession to make the new debt more attractive.
Spot gold prices rose above $1250 an ounce, a record high, benefiting from fears the euro zone's sovereign debt crisis may spread, weighing on global economic recovery.
"It is mainly the fear of another slide into recession which is seeing demand for gold as a safe haven," said Commerzbank analyst Daniel Briesemann.
