NEW YORK — Wall Street closed mixed Tuesday, recuperating from a sharp plunge as investors snapped up bargain stocks on rumors that a bond-insurer rescue plan is progressing and upbeat comments from Cisco Systems and .
Earlier in the session, the market sank after Merrill Lynch lowered its full-year earnings prediction for Citigroup Inc., which a Dubai fund executive said will need to raise more cash to stay in business. Another damper on trading was Intel, which lowered its forecast for first-quarter profit margins.
By the afternoon, the stock market showed signs of optimism. Financials regained some steam after CNBC reported that a plan to save bond insurer Ambac Financial is advancing nicely.
Technology stocks rebounded too after a Dow Jones Newswires report that Cisco chief executive John Chambers said he is “even more comfortable” with the long-term growth targets the company has outlined, and after .’s chief financial officer reiterated the online retailer’s 2008 revenue forecast.
Wall Street is jittery, however, and as the volatility of the past several months has proved, the market’s optimism can quickly turn to pessimism from one day to the next. While some investors search for bargains when stocks sink, the overall market is plagued by persistent worries about the bad debt held by the world’s banks.
“What we’re seeing is a very nervous market, and nervousness breeds volatility,” said Anthony Conroy, managing director and head trader for BNY ConvergEx Group. “It took years to put this stuff on their books; it’s not going to come off quickly.”
The Dow Jones industrial average fell 45.10, or 0.37 percent, to 12,213.80, after tumbling more than 200 points earlier in the day.
Broader stock indicators finished mixed, also rebounding off their lows of the session. The Standard & Poor’s 500 index fell 4.59, or 0.34 percent, to 1,326.75, while the Nasdaq composite index rose 1.68, or 0.07 percent, to 2,260.28.
Wall Street has been turbulent as it tries to gauge whether the economy is in recession — and whether investors have been too optimistic about corporate profits bouncing back in the second half of the year.
“The soft economy creates a difficult profit environment for most firms. And with investors’ skepticism at high levels, they are quick to sell,” said Alan Gayle, senior investment strategist at Trusco Capital Management.
Wall Street is particularly anxious over the technology sector, strong in 2007 but now one of the weakest in the market along with financials.
“Long term, tech will remain an important sector, but it is a cyclical sector and can be very volatile,” Gayle said.
