As it turns out, Bernanke can be tough read, too

WASHINGTON -- Wall Street had looked to the Federal Reserve's new plain-speaking chairman to cut through the Greenspeak of his predecessor. But investors think they're getting contradictory signals from Ben Bernanke, too, with his latest sending stocks into a nosedive.

Stocks dropped for the second day yesterday, with the Dow Jones industrial average falling to its worst close since early March. The Dow, which had plunged more than 110 points earlier in the session, narrowed losses to finish down 46.58 at 11,002.14.

Bernanke, who took over the Fed helm on Feb. 1 after longtime chairman Alan Greenspan retired, has gotten off to a bumpy start in communicating the central bank's interest-rate intentions to Wall Street.

While Greenspan's Delphian discourse was legendary, investors had 18-plus years to try to learn how to decipher what he said and the signals he was sending. It will take time for Bernanke to perfect his own signals and for investors to get better at reading them, Fed watchers say.

``Communications is a two-way street. It is difficult. I think Bernanke is learning, and I think the markets are learning," said Lyle Gramley, a former Fed board member.

Adding to Bernanke's challenge is the economy itself.

Economic growth is slowing but inflation is picking up, a tricky situation for Fed policymakers. Bernanke, in a speech Monday, made crystal clear that fending off inflation is the Fed's number one job right now, a message that sent stocks tumbling nearly 200 points as investors faced the likelihood that interest rates would rise later this month.

Bernanke's inflation message was especially jarring to investors because he had earlier raised the possibility that the central bank might take a temporary break in its two-year rate-raising campaign to assess economic conditions.