New York – Wall Street ended another erratic session mostly higher Tuesday as investors, waiting for the Federal Reserve’s next move to steady the markets, made few big commitments to stocks.
Comments from policymakers and government officials tugged at a market looking for any evidence the Fed will cut rates to help contain the credit crisis that began with the failure of subprime loans.
The Fed has taken a number of steps to prop up the nation’s financial institutions ahead of its scheduled Sept. 18 meeting, including injecting more liquidity into the banking industry and cutting the discount rate. But many on Wall Street want the Fed to do more, including lowering the more important federal funds rate, and to do it before next month’s meeting.
Traders reacted positively to comments from Senate Banking Committee Chairman Christopher Dodd, who said Fed Chairman Ben Bernanke isn’t satisfied with Wall Street’s response to his efforts to stabilize markets torn by anxiety about shrinking credit. Dodd, after a meeting with Bernanke and Treasury Secretary Henry Paulson, said policymakers plan to use “all tools available” to complete their mission.
But that bullishness cooled after Richmond Fed President Jeffrey Lacker said the central bank’s policy must be guided by fundamentals rather than market swings – indicating that a cut in the fed funds rate might not be among the tools the Fed plans to use.
“There are two camps out there, one that thinks we need a rate cut and the other doesn’t feel the economy has slowed enough to warrant one,” said Janna Sampson, director of portfolio management at Oakbrook Investments. “I think which camp leads on each day, or even each hour, is what is leading to all this volatility. There’s just too much uncertainty.”
The Dow Jones industrial average fell 30.49, or 0.23 percent, to 13,090.86 after moving in and out of positive territory throughout the day.
Broader market indexes were slightly higher. The Standard & Poor’s 500 index rose 1.57, or 0.11 percent, to 1,447.12, and the Nasdaq composite index rose 12.71, or 0.51 percent, to 2,521.30.
The day’s trading session echoed the erratic pattern seen Monday, when the Dow changed course several times and swung in a 200-point range before closing slightly higher. But Tuesday’s volatility was much more mild, free from triple-digit swings, as investors took a more cautious tone.
