"The bottom line is the Fed has downgraded the near-term economic outlook since its latest round of projections," said Stephen Stanley, chief economist at RBS Greenwich Capital.
Shifting up and down in a 140-point range throughout the day, the Dow Jones Industrial Average closed at 12,605.83, with 20 of its 30 components tallying declines, led by Merck & Co. , off 3.2%.
Blue-chip gains were fronted by General Motors Corp. , which gained 4.1%.
On the S&P, energy stocks rose the most, up 1.3%, followed by utilities, ahead 0.9%, and materials, which climbed 0.7%.
S&P sector laggards included consumer staples, down 1%, and telecommunications and health care, both off 0.9%.
The S&P 500 fell 2.65 points to 1,367.53, while the Nasdaq Composite slid 1.35 points to 2,361.40.
Financials, which led a major equities rally on Tuesday, offered a mixed finish among blue chips, with Citigroup Inc. up 0.8%, American Express Co. off 0.9%, and American International Group Inc. down 0.3%.
Retail shares drew a lift from Best Buy's better-than-expected outlook and fourth-quarter results, with shares of the nation's largest electronics retailer up 1.1%. .
Shares of other retailers gained as well. .
Volume on the New York Stock Exchange topped 4.2 billion, while more than 2 billion shares were exchanged on the Nasdaq. Advancers edged just ahead of decliners 3 to 2 on the NYSE and about 5 to 4 on the Nasdaq.
Beginning two days of testimony, Bernanke said he could not rule out a possible recession, although the Fed chief did not back off his view that the economy would pick up in the second half of the year. .
"Bernanke is coming around to where the rest of America is" when it comes to the U.S. economy, said Paul Nolte, director of investments at Hinsdale Associates. .
"The market's hesitations are also a reflection of what's going on with Bernanke's testimony. Those congressmen represent their constituents, people who have had trouble keeping their homes, and they're facing a man that has just rescued Bear Stearns; even if it was to save the financial system, it reeks of a Wall Street bail-out," said Art Hogan, chief market strategist at Jefferies & Co.
Ahead of the opening, stock index futures added to earlier gains after an ADP report said the private sector added 8,000 jobs in March, with the data coming two days before Friday's employment report. .
On the New York Mercantile Exchange, gold edged up after two sessions of sharp losses; gold for June delivery climbed $12.4 to end at $900.2 an ounce. .
Elsewhere on the NYME, crude-oil futures gained, with the contract for May delivery gaining $3.85 to settle at $104.83 a barrel, following Tuesday's 60-cent drop to $100.98 a barrel. .
Overseas, European shares extended second-quarter gains as banks such as UBS AG advanced. .
By Kate Gibson