IThe major indexes, which spent most of the session in a tight trading range, tumbled after oil prices shot higher in response to the Energy Department's report of an unexpected jump in gasoline demand. Surging demand is likely to send prices at the pump higher, a troublesome trend given that retail gas prices are expected to rise further as the summer approaches and put more financial pressure on consumers.

Consumer spending, which makes up about two-thirds of the U.S. economy, is watched closely by the Federal Reserve. Earlier Wednesday, Fed Chairman Ben Bernanke said he expects the economy to contract in the first half — a trend that would mean the U.S. is in a recession.

Bernanke, testifying before Congress, said he doesn't expect a repeat of the situation that had Bear Stearns coming close to collapse last month because of too many investments in extremely risky mortgage-backed securities. Bear Stearns ran into severe liquidity problems and had to be bailed out by the Fed and JPMorgan Chase, which is now in the process of buying the troubled investment bank.

He said that a failure of Bear Stearns would have been difficult to contain, and that was one reason why the Fed helped arrange the investment bank's sale to JPMorgan Chase.

The credit crisis and the weak economy have both sent stocks tumbling over the past six months, but a new sense of optimism sent stocks hurtling higher on Tuesday, the first day of the second quarter.

Some of the pullback late Wednesday also was pinned on profit taking after that big advance.

The Dow Jones industrials fell 48.53, or 0.38%, to 12,605.83 after changing direction several times.

Broader market indexes also fell. The Standard & Poor's 500 index fell 2.65, or 0.19%, to 1,367.53 while the Nasdaq composite index fell 1.35, or 0.06%, to 2,361.40.

Oil prices were sharply higher after the Energy Department reported an unexpected jump in gasoline demand.

"The oil uptick took away some of the optimism that we've seen recently," said Richard Cripps, chief market strategist for Stifel Nicolaus. "Higher gasoline price would mean less in the pocket for Americans, and there's also continued worries about a recession."

The dollar was mixed against other major currencies, while gold fell slightly.

Kim Caughey, equity research analyst at Fort Pitt Capital Group, said she didn't believe Bernanke had "anything new to say" and was simply reiterating previous thoughts.

"This is evidence that he is being more transparent — there are no big bombs dropping during Congressional testimony," she said.

Though numerous economists have said they believe a recession is underway, Fed officials generally are cautious when describing the economy. A recession consists of at least two consecutive quarters of economic contraction and can only be declared in hindsight.

Investors also weighed fresh economic data that indicated factory orders in the U.S. have fallen for a second month. The Commerce Department said factory orders dropped 1.3% in February, about double the downturn that economists had been expecting.

In corporate news, Best Buy said its fourth-quarter profit slipped 3% as customer traffic slowed after the holidays. But, the electronics retailer still beat Wall Street estimates.

Overseas, Asian stocks surged and Europe extended its gains.

In Europe, share prices rose for banks such as UBS, which announced it was issuing new shares to help bolster its balance sheet after another massive write-down linked to bad U.S. mortgages. But automakers lagged on weak U.S. sales data for March, as well as a broker downgrade for Daimler.

In the U.K., the FTSE 100 rose 1.1%, Germany's DAX gained 0.9% and France's CAC 40 climbed 0.9%.

In Tokyo, on the region's biggest bourse, the Nikkei 225 index rose 4.2% to 13,189.4. Hong Kong's Hang Seng Index climbed 3.2% to 23,872.4.

Benchmark indexes in Australia, Singapore, South Korea, Taiwan and the Philippines all gained more than 2%. And in mainland China, the Shanghai Composite Index finished 0.6% higher after having gained as much as 4.1%.

"Investors believe the credit crisis in the U.S. is over," said Francis Lun, a general manager at Fulbright Securities in Hong Kong. "They think the worst has gone."

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