Disappointing earnings, subprime worries and comments from the Federal Reserve chief Ben Bernanke sent all major gauges lower on Wednesday.

Bernanke told a congressional committee that while he expects a moderate pace of economic growth, inflation is still a concern.

In economic news, the Labor Department says prices at the retail level rose 0.2 per cent in June, compared to a 0.7 per cent rise in May. Meanwhile, the core the core CPI, which strips out food and energy prices, rose 0.2 per cent in June, in line with expectations.

News from the housing sector was weak, with building permit activity sinking to a pace 1.41 million last month according to the Census Bureau, though housing starts rose unexpectedly hitting an annual rate of 1.47 million in June from a revised 1.43 million the previous month.