The market seesawed through Bernanke's first monetary policy testimony before the House Financial Services Committee. Stocks fell as he warned of more rate hikes, rose as he reassured investors about the spread between long- and short-term bond yields, then turned mixed as he expressed concern about Federal budget deficits. The major indexes crept upward after his debut ended.

Bernanke said inflation is contained, but warned it could tick higher. He left the door open to future interest rate increases. He was upbeat about the U.S. economy, saying the latest employment and consumer spending data "suggests that the economic expansion remains on track."

The market has recently been hypersensitive to any hints about future Fed rate hikes, said Brian Gendreau, investment strategist for ING Investment Management. Bernanke's testimony suggests that "if the Fed is going to err, it will be on the side of more rate hikes," Gendreau said.

According to preliminary calculations, the Dow Jones industrial average rose 30.58, or 0.28 percent, to 11,058.97 after rising 136 points yesterday.

Broader stock indicators were slightly higher. The Standard & Poor's 500 index rose 4.47, or 0.35 percent, to 1,280.00, and the Nasdaq composite index rose 14.26, or 0.63 percent, to 2,276.43.

Advancing issues outnumbered declining issues by roughly 2 to 1 on the New York Stock Exchange.

Stocks' advance was slight because "we had a big move (yesterday) and we need to digest it," said Greg Church, chief investment officer of Church Capital Management in Yardley, Pa.

Stocks may continue to sway until it becomes clear when the Fed will stop raising interest rates, said Richard Madigan, global investment strategist at JP Morgan Private Bank. "There's a jumpiness in the markets that we're going to, unfortunately live with a little while longer," he said.

The market had opened lower as strong data from the manufacturing sector resurrected investors' fears that the Fed could hike rates past 5 percent, which would exceed Wall Street's expectations.

Federal Reserve industrial production data showed manufacturing rising in January; manufacturing data for both December and November was revised upward. The latest Empire State Manufacturing index, a measurement of New York's manufacturing sector and a barometer for the rest of the nation, also came in above economists' expectations.

Bonds were higher, with the yield on the 10-year Treasury note falling to 4.60 percent from 4.61 percent late yesterday. The U.S. dollar was mixed against other major currencies in European trading. Gold prices were lower.

Crude oil futures fell for the fourth straight day, dipping below $59 a barrel after U.S. government inventory data showed increasing supplies of gasoline and oil. Light crude fell by $1.92 to settle at $57.65 a barrel on the New York Mercantile Exchange. It was the lowest settlement price for the front-month futures contract since Dec. 19.

Brokerage Merrill Lynch & Co. Inc. rose 14 cents to $75.30 after it agreed to combine its investment-management business with money manager BlackRock Inc. in exchange for a nearly 50 percent stake in BlackRock, the two sides said. The transaction, expected to close in the third quarter, would transform BlackRock into one of the world's top money managers, with an asset base of around $1 trillion. BlackRock rose $5.29 to $151.25.

Wells Fargo & Co. rose 84 cents to $63.49 and Anheuser-Busch Cos. Inc. rose 71 cents to $41.68 after billionaire investor Warren Buffett's holding company, Berkshire Hathaway Inc., disclosed significant holdings in the companies yesterday as part of required filings detailing Berkshire's $42.7 billion stock portfolio. The documents filed with the Securities and Exchange Commission show that Berkshire has nearly doubled its stake in Wells Fargo since last May when it held 56.4 million shares, and it owned more than 5 percent of both. Berkshire's thinly traded class A shares fell $100 to $88,000.

Casual clothing retailer Abercrombie & Fitch fell $1.45 to $67.33 after it said its fourth-quarter earnings surged 58 percent, but warned that it expects slower sales at stores open at least a year.

Restaurant chain Outback Steakhouse Inc. fell $3.88 to $40.78 after it posted lower fourth-quarter profits. The company's results were depressed by hurricane and impairment charges, but sales at stores open at least a year also declined slightly.

The Russell 2000 index of smaller companies rose 5.40, or 0.75 percent, to 725.10.

Volume on the New York Stock Exchange was 1.73 billion shares, down from 1.81 billion at the same time yesterday.

Overseas, Japan's Nikkei stock average fell 1.56 percent. In afternoon trading, Britain's FTSE 100 dropped 0.01 percent, Germany's DAX index gained 0.02 percent, and France's CAC-40 fell 0.55 percent.