Bernanke is expected to speak on inflation at 1 p.m. EDT in Cambridge, Mass., and any indication that the Fed chairman believes price pressures are rising could heighten worries about a possible interest rate hike and give the stock market a jolt.

Meanwhile, the second-quarter earnings season appeared to be getting off to a rocky start. Early Tuesday, Home Depot Inc. and Sears Holdings Corp. offered disappointing financial outlooks that raised concerns about the housing market, and whether corporate America's future performance will give stocks the boost investors have been hoping for.

Home improvement retailer Home Depot said this year's earnings will slip more than expected due in part to the sluggish housing market, while Sears issued second-quarter guidance that fell below forecasts because of weak sales of appliances and other products.

The warnings followed second-quarter earnings late Monday from aluminum producer Alcoa Inc., which showed a 4 percent drop in second-quarter profit that met analysts' expectations, but revenue that missed the average forecast.

In mid-morning trading, the Dow fell 55.85, or 0.41 percent, to 13,594.12.

Broader stock indicators also dropped. The Standard & Poor's 500 index was down 9.10, or 0.59 percent, at 1,522.75, while the Nasdaq composite index was off 11.61, or 0.43 percent, at 2,658.41.

The financial and retail sectors saw significant losses, after Home Depot's dreary housing forecast elevated jitters about subprime lending and consumer spending. JPMorgan Chase & Co., Citigroup Inc., American Express Co. and Wal-Mart Stores Inc. were the big losers among the 30 Dow companies.

Bond prices soared, pushing down the 10-year Treasury note's yield to 5.07 percent from 5.16 percent late Monday. The decline in yields failed to boost stocks, because the decrease was caused by worries about the housing market rather than confidence that inflation is easing. In recent weeks, falling yields have buoyed the stock market; high yields can slow down dealmaking and make stocks look like a less attractive investment.

In other economic data, the Commerce Department reported that May wholesale inventories rose 0.5 percent, slightly higher than expected and higher than April's 0.3 percent uptick.

The dollar dropped to a new low versus the euro Tuesday and a 26-year low against the British pound. Gold prices edged higher.

Sears plunged $11.47, or 6.7 percent, to $159.94 after issuing its guidance. Home Depot edged up 22 cents to $40.44, and Alcoa fell 25 cents to $42.11.

Not all of Tuesday's guidance was disappointing: Pepsi Bottling Group Inc., one of the world's largest distributors of Pepsi drinks, raised its outlook for full-year earnings, and its stock rose $1.29, or 3.8 percent, to $35.72.

Dow component General Motors Co. and Ford Motor Co. also gained after a JPMorgan analyst upgraded the shares of both automakers. GM rose 52 cents to $37.29, and Ford rose 10 cents to $9.18.

Crude oil futures slipped 19 cents to $71.99 a barrel on the New York Mercantile Exchange.

The Russell 2000 index of smaller companies fell 8.11, or 0.95 percent, to 845.13.

In Asian trading, Japan's Nikkei stock average fell 0.05 percent; Hong Kong's Hang Seng Index advanced 0.3 percent to a sixth straight record close; and China's Shanghai Composite Index fell 0.8 percent.