NEW YORK — Tension grew in the financial markets Wed nesday, sending most stocks moderately lower as investors worried about the effectiveness of a still-emerging government plan to rescue banks from crippling debt. The credit markets showed added strain, with demand rising for short- term Treasury bills, considered the safest of investments.
Wall Street was calmer than during the first two days of this week, with stocks meandering in and out of positive territory while investors tried to determine what shape the $700 billion plan might take. But the atmosphere was uneasy enough to erode the initial enthusiasm over investor Warren Buffett’s decision to invest $5 billion in Goldman Sachs Group.
Investors focused on broader concerns that the talks in Washington may produce less potent medicine than proponents say is necessary to aid credit markets. Fear about bad debt on the books of financial companies has led to tightness in credit markets. That, in turn, has made it harder and more expensive for businesses and consumers to borrow.
Treasury Secretary Henry Paulson told the House Financial Services Committee that he agreed to limit the pay of Wall Street executives whose companies might benefit from the proposed measure.
Paulson appeared with Federal Reserve Chairman Ben Bernanke before Congress for a second day to brief lawmakers. Their appearance on Capitol Hill on Tuesday unnerved investors, who fear lawmakers were doubting the necessity and form of the government bailout.
“I think you’re seeing a lot of tough talk from politicians who don’t want to seem like they’re rolling over for Wall Street, and normally people would see that for what it is. But right now, investors are exceptionally nervous,” said Stephen Massocca, co-chief executive of Pacific Growth Equities in San Francisco.
The Dow Jones industrial average fell 29.00, 0.27 percent, to 10,825.17. The decline left the Dow down more than 560 points, about 5 percent, for the week.
Broader stock indicators were mixed. The Standard & Poor’s 500 index slipped 2.35, 0.20 percent, to 1,185.87, and the Nasdaq composite index rose 2.35, 0.11 percent, to 2,155.68.
The dollar, whose struggles this week contributed to volatility in other markets, was mixed. Gold prices rose.
Light, sweet crude for November delivery fell 88 cents to settle at $105.73 a barrel on the New York Mercantile Exchange.
“I think the quiet in the market is essentially the collective breath being held by investors, and unfortunately, they can’t hold their breath forever,” said Jack Ablin, chief investment officer of Harris Private Bank in Chicago.
