The S&P 500 and Nasdaq rose on Tuesday as a signal that the Federal Reserve might cut its benchmark interest rate soon muted persistent concerns about withering credit markets.
The Fed would use all available tools to calm financial markets, its chairman, Ben Bernanke, told Sen. Christopher Dodd, chairman of the Banking Committee, during a meeting. His pledge fueled speculation of an early cut in the fed funds rate, the central bank's main policy tool.
But the president of the Federal Reserve Bank of Richmond, Jeffrey Lacker, poured cold water on the optimism, saying a rate change due to market turmoil would only be warranted if it hurts the inflation or growth outlook. For details, see [ID:nN21371518]
Their goal (with the Dodd meeting) was to give the market a positive pscyhological boost to calm it, and I think they've succeeded on that front, said Angel Mata, managing director of listed equity trading at Stifel Nicolaus Capital Markets in Baltimore. The issue is what about tomorrow.
Slumping energy stocks pushed the Dow industrials into negative territory as Exxon Mobil Corp. fell after Hurricane Dean faltered before reaching key oil facilities. Oil futures slipped below $70 a barrel for the first time since July 2.
Technology shares outperformed the rest of the market, led by iPod maker Apple Inc. Its shares gained 4.4 percent to $127.57 on the Nasdaq after analysts at UBS AG said iPhone sales could top the brokerage's estimates and demand for Apple's desktop and notebook computers was strong.
The Dow Jones industrial average was down 30.49 points, or 0.23 percent, at 13,090.86. But the Standard & Poor's 500 Index was up 1.57 points, or 0.11 percent, at 1,447.12. The Nasdaq Composite Index was up 12.71 points, or 0.51 percent, at 2,521.30.
Shares of Countrywide Financial Corp jumped 10 percent to $21.79 after The Wall Street Journal said Warren Buffett's Berkshire Hathaway Inc might buy part of the company. Countrywide, the largest U.S. mortgage lender, had taken a beating in recent sessions as financing for mortgage lenders dried up.
Speculation about a rate cut boosted other financial shares, with Goldman Sachs Group Inc up 1.6 percent at $175.48 on the New York Stock Exchange.
Waschovia Corp, which raised its dividend 14 percent, rose 0.5 percent to $49.24.
Late Monday, Capital One Financial Corp said it will close the wholesale mortgage unit it bought less than a year ago. Also, a real estate survey showed U.S. home foreclosures rose 9 percent in July from June and soared 93 percent from a year earlier.
Capital One's stock ended Tuesday's session up 2.6 percent at $68.47.
September crude fell $1.65, or 2.32 percent, to settle at $69.47 per barrel, after hitting an intraday low that was the weakest since $67.07 was struck on June 27.
Exxon shares dropped 1.6 percent to $83.15.
Trading was below average on the New York Stock Exchange, with about 1.35 billion shares changing hands, well below last year's estimated daily average of 1.84 billion, while on theNasdaq, about 1.72 billion shares traded, also below last year's daily average of 2.02 billion.
Advancing stocks outnumbered declining ones by a ratio of about 3 to 2 on the NYSE and by 16 to 15 on the Nasdaq. (Additional reporting by Kristina Cooke)