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Wall Street took a step backwards on Wednesday as the bulls loosened their grip on the markets late in the day amid a slide in the financial and basic materials sectors and confusion over what play the Federal Reserve will call next.

Today’s Markets

The Dow Jones Industrial Average fell 22.86 points, or 0.21%, to 10835.28, the Standard & Poor's 500 dropped 2.97 points, or 0.26%, to 1144.73 and the Nasdaq Composite slid 3.03 points, or 0.13%, to 2376.56. The FOX 50 sank 2.49 points, or 0.30%, to 824.18.

Most of the selling took place in the final hour of the day and was led by big banks like Bank of America (NYSE:BAC). Market watchers blamed the afternoon slide on mixed signals from Fed officials about whether or not the central bank will take new steps to boost the disappointing recovery.

“I think Fed speak put us on a rollercoaster. You’ve got a market that is thinking QE2 is imminent,” said Art Hogan, chief market strategist at Jefferies & Co., referring to Wall Street’s hopes for a second round of quantitative easing from the Federal Reserve.

Most of the Dow's 30 stocks lost ground on the day, led by JPMorgan Chase (NYSE:JPM) and DuPont (NYSE:DD). The index's best performers were Boeing (NYSE:BA) and Hewlett-Packard (NYSE:HPQ), which forecasted upbeat full-year results. 

The losses put the markets solidly in the red for the week, leaving Wall Street's four-week win streak in jeopardy. However, this week's mini decline has put just a small dent into this month's gains, which still have the Dow on track for its strongest September since 1939. 

“With the majors hitting four-month highs and volume beginning to modestly rise, there is a sense (false) that we are out of the woods. There will be challenges galore in the immediate future,” Peter Kenny, managing director at Knight Capital Group, wrote in a note, pointing to the high debt levels of states like New Jersey and California. 

Wall Street received mixed signals on the Fed front on Wednesday, adding to the uncertainty in the marketplace. Non-voting Federal Open Market Committee member Charles Plosser said in a speech he sees “little gain at this point, and some costs” in further quantitative easing,. On the other hand, voting member Eric Rosengren hinted in a separate speech at further Fed action to boost the disappointing recovery.

Ever since the Fed opened the door to further asset purchases due to the slow economy and fears of deflation, Wall Street has been banking on new help from the central bank to keep interest rates extremely low and encourage growth. The markets aren't likely to hear a final decision on the Fed's next move until November, at the earliest. 

The markets were also under pressure from the financial sector, which took a 0.76% hit amid weakness from big banks like Barclays (NYSE:BCS) and PNC Financial (NYSE:PNC).

Wall Street enjoyed just a fleeting boost from the energy sector, which rallied more than 1% as crude oil erased early losses and soared nearly 2%. Crude benefited from a new oil inventory report that revealed a larger-than-expected draw in crude supplies and an unexpected plunge in gasoline inventories. Crude jumped $1.68 a barrel, or 2.21%, to $77.86. Gold posted it 11th record close this month alone, gaining $1.90 a troy ounce, or 0.15%, to $1,308.50. 

Corporate Movers

Hewlett-Packard’s (NYSE:HPQ) stock jumped 2% a day after the world’s largest tech company forecasted non-GAAP EPS of $5.05 to $5.15, which would solidly beat the Street’s view of $4.51. H-P sees revenue ranging between $131.5 billion and $133.5 billion, compared with forecasts for $125.47 billion. At its annual analyst meeting, H-P did not hint at who will replace former CEO Mark Hurd, only saying it has good internal and external candidates.

BP (NYSE:BP), which is recovering from its role in the worst oil spill in U.S. history, unveiled plans to set up a new safety and risk unit that will be led by Mark Bly and will report directly to incoming CEO Bob Dudley. The embattled energy company also announced the departure “by mutual agreement” of Andy Inglis, head of its upstream business.

Family Dollar (NYSE:FDO) beat the Street with a 23% increase in fiscal fourth-quarter profits, issued a rosy forecast for the new fiscal year and unveiled a $750 million share buyback program. Sales climbed 8% to $1.96 billion, matching Wall Street’s expectations.

Green Mountain Coffee Roasters (NASDAQ:GMCR) tumbled 16% a day after the company warned shareholders it is the subject of a Securities and Exchange Commission probe into its revenue recognition practices and relationship with a vendor. Green Mountain also said it found a $7.6 million overstatement in its pretax income due to an “immaterial” accounting error.

Campbell Soup (NYSE:CPB) said CEO Douglas Conant will step down July 31, 2011 after more than a decade in the top spot. The soup maker tapped Denise Morrison to become its new chief operating officer and said she is expected succeed Conant at the beginning of fiscal 2012.

American Greetings (NYSE:AM) revealed a 63% dive in second-quarter net income and EPS of 21 cents. Excluding one-time items, it earned 29 cents a share. Revenue sank 3.8% to $342.8 million amid a 6.8% decline in North American card sales.

Global Markets

The U.K.'s FTSE 100 slid 0.16% to 5569.27, France's CAC 40 declined 0.67% to 3737.12 and Germany's DAX dropped 0.46% to 6246.92.

In Asia, Tokyo's Nikkei 225 climbed 0.67% to 9559.38, Hong Kong's Hang Seng gained 1.22% to 22378.70 and China's Shanghai Composite lost 0.03% to 2610.68.