NEW YORK — Wall Street pulled off a big turnaround Thursday, rebounding from a steep early drop to finish modestly higher. Investors who began the day worrying about a revival of the banking crisis grew optimistic during the session that the government will again help the financial industry.
The sell-off, which followed news that Bank of America Corp. needs another government cash infusion, had the Dow Jones industrials heading for a seventh straight loss. But investors awaiting a Senate vote authorizing the second $350 billion from the government’s financial bailout fund became more upbeat as the day wore on.
They were hoping additional money from Washington will help stabilize banks; lawmakers approved the money after the market closed.
The market’s zigzag was reminiscent of the enormous volatility seen in September and October, when worries about mounting troubles at banks and the collapse of brokerage Lehman Brothers Holdings Inc. pummeled Wall Street.
The Dow rose 12.35, or 0.15 percent, to 8,212.49 after falling the past six days. The Dow was down as much as 205 during the session and briefly slipped below the 8,000 mark. That was the first move below that psychological benchmark since Nov. 21, a day after the blue chips closed at their lowest level in more than five years.
Swings of hundreds of points in the Dow industrials were at times terrifying but began to feel almost commonplace. Wall Street has shown relative tranquility since late November but still remains in a bear market, which can produce sharp turns.
Broader markets also advanced.
Some analysts attributed the comeback to the market’s own dynamics.
Joe Saluzzi, co-head of equity trading at Themis Trading LLC, said the recovery in stocks was overdue, given a 10 percent slide in the market in about a week, and he said traders were looking for any reason to rally. Saluzzi said investors might ultimately be disappointed by the government’s efforts to boost the economy but that headlines about broad spending were enough to prod the market.
“That’s the spark on top of the timber. That gets it going,” he said, referring to Washington’s plans. “I think, bottom line, it’s an oversold bounce. We’ll see if it lasts.”
Wall Street is nervous that the money already given to banks during the fall has done little to repair their balance sheets.
The government is considering a fresh multibillion-dollar aid package for Bank of America to help it absorb losses at Merrill Lynch, according to a person with knowledge of the discussions, who spoke to The Associated Press on condition of anonymity because of the sensitive nature of the discussions. Bank of America acquired Merrill Lynch on Jan. 1.
The person said the new aid package could be modeled along the lines of the financial lifeline that was thrown to Citigroup Inc. in November, in which the government guaranteed losses on more than $300 billion in troubled assets and provided $20 billion injection.
There are also expectations that Citigroup will be announcing further steps to slash costs and reduce its size because of its financial problems and that other banks could require more government help.
“People seem to be fearing the financials again, fearing that they are going to need more funding,” said Uri Landesman, head of global growth strategies at ING Investment Management.
