Wall Street closed an uneasy session lower Wednesday as investors, uncertain if the worst of the credit crisis is over, refrained from extending Tuesday’s huge advance.
Stocks bobbed in and out of positive territory for much of the day before taking a sharp turn lower in the last half-hour. Traders may well have been rattled when the chief executive of e-Trade Financial Corp., Mitch Caplan, appeared on CNBC and talked about the online brokerage’s problems resulting from losses in its $3 billion portfolio of mortgage debt. While Caplan was upbeat, any reminder of credit-related uncertainty has easily unnerved the market — especially late in a session.
“All month long, once a direction has been established, it tends to accelerate in the last hour,” said Steven Goldman, chief market strategist with Weeden & Co., in Greenwich, Conn. “They hit a grease spot, and that was the case today, as well.”
The market was initially relieved after Bear Stearns Cos. Chief Financial Officer Sam Molinaro said the investment bank’s leveraged finance business is improving. He said the company expects to take a $1.2 billion writedown during the fourth quarter, which eased worries of even higher losses.
Wednesday’s news followed reassuring comments from Goldman Sachs Group Inc.’s chief executive about its own credit exposure that helped propel the Dow Jones industrials up nearly 320 points on Tuesday.
But more evidence of the tenuousness of the credit markets came from Britain’s HSBC Holdings PLC, which said it would have to write down a further $3.4 billion from its U.S. business during the third quarter because of exposure to subprime loans, after writing down billions earlier in the year.
Meanwhile, after plunging on Tuesday, oil prices resumed their climb Wednesday, raising concerns that inflation risks could prevent the Federal Reserve from lowering rates to calm the shaky market.
According to preliminary calculations, the Dow fell 83.16, or 0.62 percent, to 13,223.93.
Broader stock indicators also fell. The Standard & Poor’s 500 index lost 10.70, or 0.72 percent, to 1,470.35, while the Nasdaq composite index tumbled 29.33, or 1.10 percent, to 2,644.32.
Treasury bonds were flat. The 10-year Treasury note’s yield, which moves in the opposite direction of its price, held at 4.26 percent, even with late Tuesday.
Gold prices rose $15.70 to settle at $814.70 an ounce on the New York Mercantile Exchange, while the dollar was mixed against rival currencies.
The Labor Department reported wholesale prices registered a slight gain in October, held down by a drop in energy costs. The moderation in inflation could be temporary, however, with oil prices surging to fresh records of around $98 a barrel in early November.
A barrel of light sweet crude rose $2.92 to settle at $94.09 a barrel on the Nymex, after plunging Tuesday by $3.45.
And while the wholesale price report suggests the Fed could afford to lower rates further when it meets on Dec. 11, the central bank did indicate after its Oct. 30-31 meeting — where it cut rates by a quarter-point — that it was satisfied with the current state of the economy and still concerned about rising inflation.
Bear Stearns Cos. rose $2.58, or 2.6 percent, to $103.45, after its CFO’s encouraging comments. Other financial stocks — which have lagged other sectors this year — rose as well but several pared their advance at the close.
Merrill Lynch & Co. rose $1.03 to $57.98, on reports that NYSE Euronext CEO John Thain is leaving to become CEO of Merrill.
Meanwhile, the Commerce Department reported retail sales managed a small increase in October as consumers struggled to cope with a steep slump in housing, volatile financial markets and soaring energy costs. It was the weakest showing since August and represented a significant slowdown from September.
Declining issues outnumbered advancers by roughly 2 to 1 on the New York Stock Exchange, where volume came to 1.56 billion shares.
The Russell 2000 index of smaller companies fell 6.80, or 0.86 percent, to 782.36.
About a half hour before the market’s open, The Associated Press reported Dow futures shot up 413 points, or about 3.16 percent. The index was later corrected to a gain of about 67 points, or 0.50 percent. Data provider Thomson Financial said it was investigating the discrepancy, which was likely the result of a software glitch.
Overseas, Japan’s Nikkei stock average closed up 2.47 percent and Hong Kong’s Hang Seng index rose 4.90 percent. In Europe, Britain’s FTSE 100 added 1.10 percent, Germany’s DAX index rose 0.07 percent, while France’s CAC-40 rose 1.35 percent.