Stocks finish lower as worries return

Wall Street finished moderately lower Wednesday, as further signs of economic deterioration damped investors’ earlier enthusiasm about the Federal Reserve’s aggressive interest rate cut.

Stocks declined in the early going after a larger-than-expected loss from Morgan Stanley offered fresh evidence of the sizable obstacles the battered financial industry still faces. The company posted a loss of $2.4 billion, or $2.34 a share, for its fiscal fourth quarter. The report came a day after rival Goldman Sachs Group posted its first quarterly loss since going public in 1999.

Some selling had been expected after Tuesday’s huge rally in which the Dow Jones industrial average rose more than 4% and other indexes gained more than 5%. The moves came after the central bank lowered its federal funds rate target to a range of zero to 0.25% -- record lows.

But after briefly moving into positive territory, stocks struggled to hold on to the big gains logged the day before as investors grappled with signs of a worsening economy, including more layoffs, and the magnitude of the Fed’s actions.

“This is a whole lot of new information for people to digest,” said David Waddell, chief executive of Waddell & Associates.

Some investors also probably took the Fed’s sharp rate cut as an indication of how dire the global financial crisis and economic troubles really are.

Still, despite Wednesday’s decline, investors have been rather resilient in recent trading sessions, an encouraging sign for analysts who believe the market might be entering a period of stability after the unrelenting selling of the last three months.

“Even if the market is down 100 points, the fact that it’s been in a narrow trading range I think is very positive,” Waddell said.

The Dow Jones industrial average fell 99.80, or 1.1%, to 8,824.34, after falling as many as 146 points earlier in the session. The Standard & Poor’s 500 index slipped 8.76 points, or nearly 1%, to 904.42, and the Nasdaq composite index fell 10.58 points, or 0.7%, to 1,579.31.

The Russell 2,000 index of smaller companies was up 3.74, or 0.8%, to 486.59.

New signs of a still-weakening job market only exacerbated investors’ concerns that the economy has far to go before pulling out of recession.

Cooper Tire & Rubber said it would cut 1,300 jobs and close a plant in Georgia, and Newell Rubbermaid is reducing its salaried workforce by as much as 10%. The maker of Rubbermaid containers also slashed its fourth-quarter and full-year profit guidance. Its shares plunged $3.60, or 27%, to $9.58.

Some financial stocks rebounded late Wednesday. After being down by as much as 8% earlier, Morgan Stanley shares gained 37 cents, or 2.3%, to close at $16.50. Goldman Sachs added $2.78, or 3.7%, to $78.78.

Energy stocks slumped on falling oil prices. Chevron dropped $2.19, or 2.8%, to $76.82, while Exxon Mobil lost $2.08, or 2.5%, to $81.06.

Oil prices traded below $40 for the first time since the summer of 2004 despite an announcement from the Organization of the Petroleum Exporting Countries that it planned a record production cut of 2.2 million barrels a day.

Light, sweet crude for January delivery fell 8%, or $3.54, to $40.06 a barrel on the New York Mercantile Exchange.

The dollar sank to a two-month low against the euro and a 13-year low against the yen. Gold prices rose.

Bond prices extended sharp gains. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.19% late Wednesday from 2.28% late Tuesday.