Underscoring the concern of the economy's weakness, Federal Reserve Chairman Ben Bernanke, during his semiannual report, told the Senate Banking Committee the US economic recovery effort was being held back by Europe's debit crisis.
Bernanke told politicians that the central bank is considering options to boost the economy.
"Reflecting its concerns about the slow pace of progress in reducing unemployment and the downside risks to economic growth, the committee made clear at its June meeting that it is prepared to take further action," said Bernanke.
The news brought mix response in the stock market, as many companies revealed their quarterly earnings today, such as Coca-Cola, Mattel, and Yahoo.
Investors had originally hoped Bernanke would signal that the central bank was moving close to a third round of bond purchases, or QE3 in market jargon, to support the economy.
Stocks initially fell but rebounded by the afternoon as investors bought shares that have potential to perform well under the struggling economy.
Bernanke said the risks of a rise in inflation were low and there was actually a meek risk of deflation, a potentially disabling fall in prices.
In earning reports, toy maker company Mattel performed well with a 10 percent increase, the most compared to other companies in the S&P 500. Mattel stock increased to $34.39 from the $3.34.
Coca-Cola posted better than expected, partly due to increase of sales overseas, with stocks rising to $77.90.
Goldman Sachs also beat Wall Street expectations as its stock improved to $97.75 due to a 37 percent increase in sales from mortgages and commodity trading.
In the end of his testimony, Bernanke told lawmakers of the negative possibilities if Congress does not reach an agreement on a budget soon.
"It would probably knock the recovery back into a recession and cost a lot of jobs, and would greatly delay the recovery that we're hoping to facilitate," said Bernanke.
Bernanke and members on the Federal Open Market Committee will meet in two weeks to discuss whether further action is needed to reduce the unemployment rate that has been held above eight percent since February 2009.
During the second quarter, job creation averaged 75,000 per month, down from an average of 226,000 in the first quarter.
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