NEW YORK — The stock market had a halfhearted comeback Tuesday after the Federal Reserve announced it would take small steps to stimulate the economy.
The Dow Jones industrial average, down about 100 points before the Fed announced its plans, recovered to a loss of 54. The other major market indexes also bounced from their lows. But investors were still cautious: The Dow, which was able to briefly show a gain, fell back again as traders recognized that the Fed’s moves, while welcome, would be small and won’t cure the economy’s problems.
Losing stocks were ahead of advancers on the New York Stock Exchange by almost 3 to 1. And stocks considered safe bets in a weak economy, including health care and consumer-products companies, were among the gainers.
The Fed, in a statement issued after a one-day policy meeting, said it will use money from its investments in mortgage securities to buy government debt on a small scale. Because rates on bonds and other debt fall as their prices rise, the Fed’s purchases should help send long- term rates on mortgages and corporate debt slightly lower — and, the Fed hopes, stimulate lending to consumers and businesses.
The Dow closed down 54.50, or 0.5 percent, at 10,644.25 after the Fed’s midafternoon statement. The Standard & Poor’s 500 fell 6.73, or 0.6 percent, to 1,121.06. The Nasdaq composite closed down 28.52, or 1.2 percent, at 2,277.17.
News that the Fed would be buying government debt — and, in the process, reduce the supply of Treasury issues on the market — sent Treasurys higher.
The yield on the government’s 10-year note, which moves in the opposite direction from its price, fell to 2.75 percent, from 2.82 percent before the announcement. The yield is used to help set rates on mortgages and other consumer loans.
Analysts said that while investors were hoping the Fed would take some steps to help the economy, the market recognizes the limitations of the central bank’s plans.
“We had an hour or so of rally, but then it backed off a bit,” said Dan Cook, Chicago-based senior market analyst with brokerage firm IG Markets. “Traders realized it’s not a game-changer. It’s not going to pump up the market.”
Some analysts said the Fed is moving slowly in its current stimulus plans so investors don’t get the sense that the economy is more troubled than they have thought.
