NEW YORK — Wall Street showed a little resilience Wednesday as investors got answers to some of their questions about banks.
The major indexes closed down about 1 percent but recovered from much steeper losses early in the day, continuing the volatile trading that has buffeted the market this week.
Stocks initially fell on growing pessimism about the banking industry and a home-sales report that came in weaker than the market expected. But as the day wore on, some of the uncertainty about the troubled banking system lifted when the Treasury Department said it’s beginning to “stress test” the banks.
The test will use two economic scenarios to measure banks’ health, and the process is expected to be done by the end of April.
The government also gave the market some reassurance by confirming that it will buy preferred shares from banks that can be converted into common shares. And investors found solace when Federal Reserve Chairman Ben Bernanke rejected for the second straight day the notion that banks could be nationalized.
The Dow Jones industrial average ended down 80.05, 1.1 percent, at 7,270.89 after rising 236 points Tuesday and falling 251 on Monday. The average tumbled by as many as 194 points in early trading Wednesday and later was up 54 before retreating again.
Broader stock indicators also recovered from earlier lows but finished down. The Standard & Poor’s 500 fell 8.24, 1.1 percent, to 764.90, and the Nasdaq composite fell 16.40, 1.1 percent, to 1,425.43.
The S&P 500 index’s ability to hold above its November lows despite the market’s severe volatility this week shows the potential for a stock recovery, said Ryan Detrick, senior technical strategist at Schaeffer’s Investment Research.
“We really just need more clarity,” Detrick said.
Still, Wall Street remains worried about the recession deepening, dividends disappearing and how the government will get toxic assets off banks’ books.
“We’re seeing a lot of nervousness, and that’s breeding volatility,” said Anthony Conroy, managing director and head trader for BNY ConvergEx Group. “We’re definitely in a bottoming process of the market, but it’s not coming as quickly as some people would like.”
