New York – Wall Street tumbled again Wednesday after the Federal Reserve added more cash to the banking system but failed to quash investors’ jitters about problems in lending.
The market traded nervously, jerking the Dow Jones industrial average above and below the 13,000 mark throughout the day as investors wrestled with reports about potential trouble at Countrywide Financial Corp. and KKR Financial Holdings LLC.
By late in the day, investors saw little reason to buy, and the Dow closed down nearly 170 points. The Standard & Poor’s 500 index also dropped sharply and is now down for the year.
In Asia, markets continued to fall sharply today. The Hang Seng Index in Hong Kong was down 3.6 percent by midday, extending a 2.9 percent drop Wednesday. That’s the measure’s biggest two-day decline since September 2001.
Markets were also down sharply in Tokyo and Taiwan.
Central banks worldwide have supplied billions of dollars’ worth of funds to banks over the past week to make cash available for lending and keep interest rates stable amid signs that credit was drying up. On Wednesday, the Fed said it would accept a “repo” of $7 billion, in which it buys that amount in securities from dealers, who then deposit the money into commercial banks.
Still, the Fed has not indicated it will cut interest rates at its Sept. 18 meeting. Inflation has been keeping the central bank from lowering rates; the Labor Department said Wednesday its Consumer Price Index rose a mild 0.1 percent in July.
The Dow fell 167.45, or 1.29 percent, to 12,861.47, closing below 13,000 for the first time since April 24.
Broader stock indicators also fell. The S&P 500 index dropped 19.84, or 1.39 percent, to 1,406.70. The Nasdaq composite index lost 40.29, or 1.61 percent, to 2,458.83.
