Tense market falls ahead of Bernanke speech

US stocks fell on Thursday as investors raised cash ahead of a critical speech from Fed Chairman Ben Bernanke, hoping he will give them a clearer picture of the Fed's plans for the struggling economy.

Several negatives contributed to the market's weakness after three days of gains. Jitters over a sharp drop in German stocks and a report showing continued US job market weakness helped fuel the selling.

Stocks rose earlier this week, partly on expectation the soft US economy could trigger another round of monetary stimulus from the Federal Reserve, much like the one suggested by Bernanke at the same conference in Jackson Hole, Wyoming, a year ago.

The Dow Jones industrial average dropped 170.89 points, or 1.51 percent, to 11,149.82. The Standard & Poor's 500 Index fell 18.33 points, or 1.56 percent, to 1,159.27. The Nasdaq Composite Index lost 48.06 points, or 1.95 percent, to 2,419.63.

Europe's top shares ended lower after another volatile trading session, as talk of an imminent ban on short-selling in Germany, later denied, swept through equity markets.

Germany's leading share index tumbled as much as 5 percent at one stage before recovering to close down 1.7 percent at 5,584.14 after a finance ministry spokesman said Germany is not planning a general ban on short-selling.

The FTSEurofirst 300 index of top European shares closed down 1.3 percent at 925.06 points, having gained for the three previous sessions.

Markets across Europe echoed the fall in Germany, with Britain's FTSE 100 1.4 percent lower and France's CAC 40 down 0.7 percent.

Italy, France and Belgium have already implemented short-selling bans and will announce whether they will be extended to prevent any further slide in bank shares as the euro zone debt crisis deepens.