Market ends higher following erratic day
NEW YORK » Wall Street scored a moderate gain after a volatile session yesterday that saw the major indexes ratchet up and down on the seesawing price of oil and mixed feelings about the financial sector.
Concerns about mortgage financiers Fannie Mae and Freddie Mac initially dragged down financials. Wall Street is nervous that the government-chartered companies will need a bailout from the U.S. Treasury Department, a move that could wipe out shareholders' equity. Fannie Mae shares tumbled nearly 27 percent, while Freddie Mac shares lost 22 percent.
But because financial stocks have fallen so far over the past few days, some traders appeared to be covering many of their short positions, which drove a large portion of bank and brokerage stocks higher late in the day, said Peter Cardillo, chief market economist at New York-based brokerage house Avalon Partners Inc. Short-covering is a way to offset a bet that a stock will fall.
Some stocks had turned higher earlier in the session after Fannie Mae Chief Executive Daniel Mudd said the concerns about the company's financial position are overblown.
Meanwhile, oil prices finished higher -- bad news for consumers, but a boost to energy company stocks, which also attracted buying yesterday.
The Dow Jones industrial average rose 68.88, or 0.61 percent, to 11,417.43 after being down by nearly 60 points and up more than 100. Concerns about inflation and the financial sector led the Dow to post its worst two-day performance since late June on Monday and Tuesday with an overall drop of about 310 points.
The Russell 2000 index of smaller companies rose 1.57, or 0.22 percent, to 731.60.
Broader stock indicators also ended yesterday with a gain. The Standard & Poor's 500 index rose 7.85, or 0.62 percent, to 1,274.54, while the Nasdaq composite index rose 4.72, or 0.20 percent, to 2,389.08.
Oil, which has rebounded this week after dropping $35 from its July 11 high of $147.27, ended up modestly, even after the U.S. Energy Department said crude oil inventories rose much more than forecast last week.
Light, sweet crude rose 45 cents to $114.98 per barrel on the New York Mercantile Exchange, after alternating between gains and losses.
Bond prices rose. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.80 percent from 3.84 percent late Tuesday.
The dollar rose against other major currencies. Gold prices also rose.
Advancing issues outnumbered decliners by about 8 to 7 on the New York Stock Exchange, where consolidated volume came to a light 4.45 billion shares, up from 4.07 billion shares Tuesday.
Fannie Mae fell $1.61, or nearly 27 percent, to $4.40, while Freddie Mac fell 92 cents, or 22 percent, to $3.25.
Hewlett Packard rose $2.47, or 5.7 percent, to $46.16 after posting better-than-expected quarterly results late Tuesday.