Cautious economic outlook pressures on U.S. stocks

NEW YORK, Dec. 7 (Xinhua) -- U.S. stocks pared gains in late afternoon trading and ended mixed on Monday after Federal Reserve Chairman Ben Bernanke's cautious take on economic recovery.

The Dow Jones inched up 1.21, or 0.01 percent, to 10,390.11. Broader indexes retreated. The Standard & Poor's 500 index fell 2.73, or 0.25 percent, to 1,103.25 and the Nasdaq slid 4.74, or 0.22percent, to 2,189.61.

Bernanke, speaking at the Economic Club of Washington, said it is still too early to declare the economic recovery is lasting. He said the economy confronts "formidable headwinds" -- including a weak job market, cautious consumers and tight credit. Some private forecasters even fear that the recovery could fizzle late next year as government stimulus fades.

Bernanke pledged again to hold interest rates at low levels for an "extended period" as inflation is under control. To help revive the economy, the Fed has kept key interest rates at record low near zero for a year.

Investors believe that the Fed will decide to leave rates at current extra-low levels at its meeting next week. Low interest rates are expected to boost consumers and businesses spending, which is important to a recovery.

Bernanke said he could not rule out the possibility of a "double dip" recession. He said he would stick to previous forecast of a moderate recovery, but said a "vigorous snapback" is less likely.

Bernanke said he expects "modest" economic growth next year, which would help to bring down the jobless rate. A government report released last Friday suggested that current jobless rate stands at 10 percent.

Fed had predicted last month that it would take as long as five or six years for the job market to fully recover and the central bank was less optimistic about short-term outlook of labor market, foreseeing a possible 9.3 to 9.7 percent in 2010.

A separate report from the Fed shows that consumer credit tightened in October, a record ninth straight month. The report also cast shadows on the prospect of a sustained recovery.

The Fed report says consumer credit fell at an annual rate of 3.5 billion U.S. dollars in October, lower than the 9.3 billion dollars decline economists had expected. Consumer credit decreased at a slower pace of 1.7 percent compared with a 4.2 percent drop in September.

The dollar fluctuated on Monday, retreating from early highs after Bernanke comments but rebounding again in late afternoon trading. Commodities prices tumbled and weighed on the big board.

Gold declined for a second session. Crude oil prices fell 2 percent to settle below 74 dollars a barrel in New York trading, the lowest level in two months.

Energy and basic material shares fell. SPDR Gold Trust (ETF), the world's largest gold ETF, fell 63 cents to 113.12 dollars. International Coal Group, Inc. fell 28 cents, or 6.54 percent, to 4 dollars. Exxon Mobil Corporation dipped 48 cents, or 0.65 percent, to 73.77 dollars.