Stocks had traded in positive territory for most of the session, lifted by an upbeat sales report from Wal-Mart Stores Inc. and a raft of solid economic data on industrial activity, construction and consumer spending. But the market took a late-day dive following reports that Bernanke said he was worried about media and investor speculation that the Fed is done raising interest rates in its long-running battle against inflation.

Last Thursday, Bernanke told a congressional panel the central bank could pause — but not necessarily stop — its string of rate hikes while it keeps a close watch on the economy's health. However, according to CNBC, Bernanke said future increases will depend mostly on economic data; that stand was troubling to an interest rate-sensitive market.

Although the day's better-than-forecast economic numbers gave investors reassurance that the economy is growing at a comfortable pace, Treasury yields jumped as the bond market fretted about interest rates. Continued tension over Iran's nuclear arms program also drove up oil prices almost $2 a barrel.

The Dow Jones industrial average slid 23.85, or 0.21 percent, to 11,343.29, after gaining as much as 61 points early in the session.

Broader stock indicators declined. The Standard & Poor's 500 index dropped 5.42, or 0.41 percent, to 1,305.19, and the Nasdaq composite index lost 17.78, or 0.77 percent, to 2,304.79.

The dollar tumbled against the Japanese yen and was little changed against other major currencies, while gold prices lingered at 25-year highs. Elsewhere, a barrel of light crude added $1.82 to settle at $73.70 on the New York Mercantile Exchange.

Today's uplifting economic news sparked the bond market's fears about interest rates and sent it running for cover, boosting the yield on the 10-year Treasury note to 5.14 percent from 5.07 percent late Friday.

The day's trading illustrated how precarious Wall Street's gains are when there's even a hint of more rates hikes from the Fed.

Stocks initially rose after the Commerce Department said personal income rose 0.8 percent in March as spending gained 0.6 percent, topping forecasts for both numbers to add just 0.4 percent. The department also said March construction spending swelled 0.9 percent, compared with forecasts for 0.4 percent. Elsewhere, the Institute for Supply Management's April manufacturing index gained 2.1 points to 57.3, while economists saw a 0.2-point drop.

But with the economy appearing to be in good shape, investors are now concerned about how close the Fed is to stopping its rate hikes. While many on Wall Street fear inflation will bring more rate increases, some also worry that the central bank will go too far and trigger an economic slide.

"The Fed is at the point where they have to start being a little more forward looking and signal to the market when they're in the fine-tuning mode," said Michael Gregory, a senior economist for BMO Nesbitt Burns. "I don't think (Bernanke) has been misinterpreted, it's just that legitimate risks on both the inflation and growth sides have opened up."

Wal-Mart jumped 90 cents to $45.93 after the discount retailer said its sales at stores open at least a year grew 6.8 percent in April, better than the 4 percent to 6 percent it had predicted.

Boeing Co. agreed to buy aircraft parts and services supplier Aviall Inc. for $1.7 billion in cash. The $48-per-share deal is a 27 percent premium to Aviall's Friday closing price. Boeing rose 41 cents to $83.86, and Aviall surged $9.26 to $46.96.

Level 3 Communications Inc. is acquiring regional telecommunications company TelCove Inc. for $637 million in stock and $445 million in cash. Level 3 is also assuming $155.5 million of TelCove's debt. Level 3 rose 32 cents to $5.772.

A group of investors offered almost $5.8 billion to acquire food service provider Aramark Corp., sending its shares soaring $5.79 to $33.90. The $32-per-share deal was a 14 percent premium to Aramark's Friday closing price.

Tyson Foods Inc., the world's largest meat processor, said it fell to a $127 million loss last quarter, hurt by an oversupply of meat and charges from closing plants. Tyson nonetheless added 11 cents to $14.71.

Declining issues overtook advancers late in the day and were ahead by 9 to 7 on the New York Stock Exchange, where volume of 1.74 billion shares trailed the 1.8 billion shares that changed hands Friday.

The Russell 2000 index of smaller companies lost 3.42, or 0.45 percent, to 761.12.

Overseas, Japan's Nikkei stock average rose 0.12 percent. European markets were closed for the May Day holiday.