The Dow lost more than 110 points in midday trading before narrowing its loss later in the session. The index dropped nearly 200 points yesterday after Federal Reserve Chairman Ben Bernanke spooked Wall Street by saying that the central bank will remain vigilant in fighting inflation.

Investors have been hoping the Fed would stop increasing short-term interest rates after 16 hikes; the nation's benchmark rate now stands at 5 percent. However, Bernanke's comments in recent weeks have repeatedly shaken investors and sent stocks tumbling.

"Bernanke came in with this reputation as a great communicator," said John Caldwell, chief investment strategist for McDonald Financial Group, part of Cleveland-based KeyCorp. "Most of us would choose to go back to the general confusion (former Fed Chairman Alan) Greenspan created."

The Dow fell 46.58, or 0.42 percent, to 11,002.14. The index tumbled 199.15 points, or 1.77 percent, during yesterday's session.

Broader stock indicators were also lower. The Standard & Poor's 500 index fell 1.44, or 0.11 percent, to 1,263.85, and the Nasdaq composite fell 6.84, or 0.32 percent, to 2,162.78.

Declining issues led advancers by more than 2 to 1 on the New York Stock Exchange.

Stocks in most Asian markets fell hard today, with Tokyo's Nikkei 225 index down 1.81 percent, while India's benchmark index fell 2.51 percent. The major European indexes also dropped, with Ireland's benchmark index down 4.89 percent and Austria's benchmark falling 4.75 percent.

Bonds rose, with the yield on the 10-year Treasury note falling to 5.01 percent from 5.02 percent late yesterday. The U.S. dollar was mixed against other major currencies, while gold prices were lower.

Crude oil futures were down slightly. A barrel of light crude settled at $72.50, down 10 cents, in trading on the New York Mercantile Exchange.

Wall Street's decline comes as investors fret about Bernanke's communication skills. For instance, CNBC reported on May 1 that Bernanke believed investors had misinterpreted his recent congressional remarks as an indication the Fed was nearly done raising rates. Stocks — which had been up for most of that day — slumped immediately and Bernanke later said he regretted the remark.

"(S)eeds of confusion continue to be sown by this new Fed, and there is no doubt a risk that we will see a policy misstep at the end of June," wrote David A. Rosenberg, Merrill Lynch's North American economist, in a note to clients today.

The fear among investors is that an over-vigilant Fed will raise rates too far, cooling the economy to the point of recession. Bernanke's communication stumbles have only served to make the market more nervous.

Investors have plenty of other worries, too, including sky-high commodity prices and turbulence in foreign markets.

"You have all these factors going on," said Ralph Acampora, managing director of technical research Knight Capital Group. "What Bernanke said the other day is the pin that hit the balloon."

Some of the stocks that have seen the biggest run-up over the past three years look especially vulnerable now. One of the sectors hit hardest today was homebuilding, where a group of stocks fell following a downgrade by Wachovia Securities. D.R. Horton Inc., the nation's largest homebuilder by units, fell $1.40, or 5.6 percent, to $23.41; KB Home fell $3.28, or 6.7 percent, to $45.82 and Pulte Homes Inc. fell $1.64, or 5.5 percent, to $28.11 after the downgrade.

Other homebuilders continued to slide as investors remained nervous about the once-hot stocks. Toll Brothers Inc. fell $1.03, or 3.7 percent, to $26.55 and Hovnanian Enterprises Inc. fell 96 cents, or 3.1 percent, to $29.75.

In other company news, IBM Corp. rose 70 cents to $79.76 after the technology company said it would triple its investments in India to $6 billion over the next three years. Chairman and Chief Executive Sam Palmisano said the investment will be used to build service delivery centers in Bangalore, India's technology hub, and create telecommunications research and innovation center for IBM's telecom clients around the world.

Hewlett-Packard Co. fell 69 cents to $30.90 after the company revised its full-year outlook upward, thanks to a favorable tax settlement with the U.S. government. The revised forecast still fell short of analysts' expectations.

Volume on the New York Stock Exchange came to 1.90 billion shares, up from 1.63 billion yesterday.

The Russell 2000 index of smaller companies fell 2.96, or 0.41 percent, to 710.96.

In other overseas markets, Britain's FTSE 100 fell 1.60 percent, Germany's DAX index dropped 2.11 percent, and France's CAC-40 lost 2.40 percent.