NEW YORK — Stocks rose Tuesday after investors found solace in the European Central Bank’s $500 billion loan issuance, but the possibility of recession in 2008 made for a back-and-forth session.
The ECB’s massive 16-day tender supported the idea that the world’s central banks are working to revive demand in struggling areas of the credit market. The Bank of England also said it will offer additional reserves to lenders, after the U.S. Federal Reserve on Monday auctioned off $20 billion in 28-day credit.
Few are calling the end of the credit crunch just yet, though, and the market’s seesaw movements Tuesday reflected its uncertainty. Alongside U.S. government data showing that new-home construction dropped in November to its lowest rate in more than 16 years, the central banks’ actions had a hard time galvanizing a market that remains worried that the economy has further to fall.
“It’s very disconcerting that we’re getting central-bank interventions for a problem that many were hoping would be a self-contained one,” said Joseph Battipaglia, chief investment officer at Ryan Beck & Co.
Meanwhile, cautious comments from Goldman Sachs Group Inc. and Best Buy Co. dampened some of the market’s enthusiasm over the companies’ better-than-expected quarterly earnings.
“The credit issues, the liquidity issues, are still there,” said Ryan Detrick, strategist at Schaeffer’s Investment Research. “There’s a dark cloud over the market.”
But after several sessions of declines, the Dow Jones industrial average rose 65.27, or 0.50 percent, to 13,232.47, after gaining as many as 112 points, falling by 75 points and then rebounding.
The blue-chip index had lost 4 percent in the past week since the Fed’s decision Dec. 11 to lower interest rates by a quarter point, which was less than many investors had hoped.
Broader stock indicators also bounced back from a midday slump.
The Standard & Poor’s 500 index rose 9.08, or 0.63 percent, to 1,454.98, and the Nasdaq composite index rose 21.57, or 0.84 percent, to 2,596.03.
The Commerce Department said housing starts and building permits fell last month compared with October, bolstering investors’ belief that the economy will continue to feel the housing market’s drag in the new year. Housing starts fell 3.7 percent to the lowest level in more than 16 years, while building permits fell 1.5 percent to the lowest in more than 14 years.
