US STOCKS-Market flat after cautious Bernanke comments

(Updates to early afternoon, changes byline)

By Caroline Valetkevitch

NEW YORK, April 2 (Reuters) - U.S. stocks were little changed on Wednesday a day after the market's biggest rally in two weeks and following cautious comments on the economy from Federal Reserve Chairman Ben Bernanke, who said a recession was possible.

Energy shares gained on higher oil prices, providing support to the market.

Conglomerate General Electric (GE.N: Quote, Profile, Research) and computer services provider International Business Machines (IBM.N: Quote, Profile, Research), which often reflect the economy's cycles, were among the biggest drags on major indexes.

U.S. crude oil futures rose as gasoline futures jumped on data showing U.S. inventories declined last week for the third week in a row. Shares of Exxon Mobil Corp (XOM.N: Quote, Profile, Research) rose 1.5 percent to $88.53.

Testifying before the congressional Joint Economic Committee, Bernanke conceded for the first time the U.S. economy may slip into recession but said growth should pick up later this year as interest rate cuts and other emergency steps take root.

"Chairman Bernanke's not ruling out further weakening of the economy is keeping the market from moving much higher today," said Michael James, senior trader at regional investment bank Wedbush Morgan in Los Angeles.

"It's not unexpected that we would take a rest from the big move we had yesterday," he said.