Bounce-back nearly erased
Stocks had surged after the Fed said it would work with other central banks.
NEW YORK - Wall Street closed moderately higher in an erratic session yesterday as worried investors were not reassured by a Federal Reserve plan to work with other central banks to alleviate the global credit crisis.
Investors erased a 272-point gain in the Dow Jones industrial average that followed the Fed's announcement of an agreement with the European Central Bank and the central banks of England, Canada and Switzerland to confront what it called elevated pressures in the credit markets.
The move helped boost investor sentiment a day after the Fed disappointed Wall Street with quarter-point cuts in interest rates. Many investors had hoped for half-point reductions.
But the Fed's latest salvo did not appear to assuage Wall Street's concerns about the spike in bad debt that has caused the credit markets to tighten in recent months, nor did it ease investors' concerns about the nation's economic health.
"There's still no certainty that we're out of the woods . . . there's still a risk for recession," said Steven Goldman, chief market strategist at Weeden & Co. L.P.
He pointed out that the biggest beneficiaries during a period of rate cuts are bank and brokerage stocks. However, the sector was under pressure yesterday as investors worried that the institutions would take further write-downs after warnings from Bank of America Corp., Wachovia Corp. and PNC Financial Services Group. All have operations in the Philadelphia area.
The Dow rose 41.13, or 0.31 percent, to 13,473.90. The Standard & Poor's 500 index rose 8.94, or 0.61 percent, to 1,486.59. The Nasdaq composite index rose 18.79, or 0.71 percent, to 2,671.14.
Energy prices soared after the government reported surprising declines in U.S. stockpiles of crude oil, and they surged even further after reports of a fire at an Exxon Mobil Corp. refinery in Texas. A barrel of light, sweet crude jumped $4.37 to close at $94.39 a barrel on the New York Mercantile Exchange.
Exxon Mobil shares rose $1.64 to close at $91.92.
In other corporate news, Wachovia doubled its estimate of loan-loss provisions to about $1 billion for the fourth quarter, while Bank of America pointed to bigger write-downs and said it expected current credit-market turbulence to extend into 2008. PNC said the money it would set aside to cover bad loans for the last three months of the year would be more than twice as large as in the third quarter.
Wachovia fell $1.42, or 3.38 percent, to $40.53 yesterday. Bank of America dropped $1.22, or 2.73 percent, to $43.43. PNC fell $2.51, or 3.55 percent, to $68.25.
SLM Corp., the student-loan company known as Sallie Mae, slashed its 2008 earnings because of the costs of replacing an interim-funding facility. It also disclosed that it failed to renegotiate a buyout with an investor group that balked several months ago at its original $25 billion cash offer. SLM fell $3.45, or 10.80 percent, to close yesterday at $28.49.