Stocks fell on Wednesday reacting to escalating stress between Iran and the West and caution before speech from Federal Reserve Chairman Ben Bernanke.

Bernanke will be questioned about the effect of the subprime mortgage market crisis on the economy.

"At this juncture ... the impact on the broader economy and financial markets of the problems in the subprime markets seems likely to be contained," Bernanke said in prepared testimony to Congress' Joint Economic Committee.

The crumbling housing market has been a major factor behind the slowdown in the U.S. economy. Bernanke said the "near-term prospects for the housing market remain uncertain."

Shares of Wal-Mart Stores decreased 1.4 percent to $46.82 after comments from the chief executive of the world's largest retailer that 2007 is going to be a "challenging" year.

The Dow Jones industrial average declined 58.56 points, or 0.47 percent, to 12,338.73. The Standard & Poor's 500 Index decreased by 6.77 points, or 0.47 percent, to 1,421.84. The Nasdaq Composite Index was down 12.89 points, or 0.53 percent, at 2,424.54.