NEW YORK — Wall Street finished higher in an uneasy session Monday as retail and homebuilders’ stocks rose on expectations for more interest- rate cuts but banks and insurers fell on worries about further mortgage troubles.
The Federal Reserve has been in rate-cutting mode this year, and it is expected to lower the federal funds rate once more either this month or at its next scheduled meeting March 18. And the cheaper cost of money is beginning to register in the stock market.
“A number of sectors like retail and housing stocks have done better since the Fed acted, and they are leading the market again today,” said Steve Goldman, chief market strategist at Weeden & Co. “These stocks are called early bellwethers, and they tend to lead a recovery.”
But investors continue to grapple with bad news in the credit markets. The stock market fell in early trading and remained volatile even after recovering, with Wall Street clearly concerned by news that American International Group might have more mortgage debt to write off.
AIG, one of the 30 companies that make up the Dow Jones industrial average, said in a regulatory filing it would need to alter the way it values its credit- default swaps involving collateralized debt obligations. Credit-default swaps are insurance policies against defaults, and CDOs are funds that contain slices of bonds, some of which are backed by mortgages.
The insurer said auditors found it “had a material weakness in its internal control over financial reporting and oversight” regarding how it valued certain credit-default swaps. The filing raised concerns that there will be further losses at AIG and that other financial companies might reveal similar problems. AIG dropped $5.94, or 11.7 percent, to $44.74.
The Dow rose 57.88, or 0.48 percent, to 12,240.01.
Broader stock indicators ended higher, too. The Standard & Poor’s 500 index rose 7.84, or 0.59 percent, to 1,339.13, and the Nasdaq composite index rose 15.21, or 0.66 percent, to 2,320.06.
Dow’s components
The Dow Jones industrial average is undergoing its first component changes since 2004, with Altria Group and Honeywell being replaced by Bank of America and Chevron, effective Feb. 19:
• Alcoa
• American Express
• AIG
• AT&T
• Bank of America
• Boeing
• Caterpillar
• Chevron
• Citigroup
• Coca-Cola
• Walt Disney Co.
• DuPont
• Exxon Mobil
• General Electric
• General Motors
• Hewlett- Packard
• Home Depot
• Intel
• IBM
• Johnson & Johnson
• J.P. Morgan Chase
• McDonald’s
• Merck
• Microsoft
• Pfizer
• Procter & Gamble
• 3M
• United Technologies
• Verizon
• Wal-Mart Stores
