Fed aid helps Dow rebound
Crisis averted, at least for the moment.
The U.S. stock market closed mixed Friday, paring heavy morning losses after the Federal Reserve and other central banks around the world injected more money into the financial system to reduce the potential for a deepening crisis in global credit markets.
The Federal Reserve pumped $38 billion into the banking system Friday, a day after injecting $24 billion. The European Central Bank, which infused $130 billion Thursday into the European banking system, added $83 billion on Friday.
“One thing that’s on your side as an investor is that the two largest printing presses on Earth for money, the central bank of Europe and the Fed here, are stepping into the system,” said James Swanson, chief investment strategist at MFS Investment Management in Boston.
A day after tumbling 387 points, the Dow Jones industrial average was off as much as 213 points early in the day, then rebounded to close down 31.14 points, or 0.2%, at 13,239.54.
Buyers returned after a morning dive. The Standard & Poor’s 500 index ended with a gain of 0.55 of a point to 1,453.64; the Nasdaq composite was off 11.60 points, or 0.5%, to 2,544.89.
Smaller stocks fared better than bigger issues. The Russell 2,000 index rose 3.91 points, or 0.5%, to 788.78.
Declining issues outnumbered advancers by more than 5 to 3 on the New York Stock Exchange. Volume was again heavy.
Friday’s moves were typical of the zig-zag trading since the Dow closed at a record 14,000.41 on July 19. The index is down about 761 points, or 5.4%, since then.
Some traders said the market was simply exhausted after the week’s wild ride.
“I think everybody’s just tired of trading,” said Todd Leone, a veteran trader at Cowen & Co. in New York.
Shares of consumer product companies led the rebound. Viacom, the owner of MTV and Paramount Pictures, added $1.87 to $38.92. Nike, the world’s largest athletic-shoe maker, advanced $1.88 to $55.78. Gap, the biggest U.S. clothing retailer, rose $1.09 to $16.75.
A gauge of energy shares in the S&P; 500 increased 1.2%, although oil prices fell. Exxon, the world’s biggest oil company, added 91 cents to $84.51. Chevron, the No. 2 U.S. oil company, climbed $2.31 to $83.42.
Marathon Oil and refiners Tesoro and Valero Energy rose after the stocks were upgraded by analysts. Marathon climbed $2.62 to $51.86. Tesoro added $2.30 to $49.30. Valero advanced $1.35 to $68.90.
Despite Thursday’s market plunge, major stock indexes rose for the week -- after three straight weeks of losses -- thanks to their rebound Monday through Wednesday. The Dow gained 0.4% for the week, the S&P; 500 was up 1.4% and the Russell 2,000 rebounded 4.4%.
Credit markets began to seize up Thursday, after a major French bank said it had halted investor withdrawals from three funds that suffered losses on U.S. sub-prime mortgage-backed bonds. That triggered a new wave of fear about the extent of sub-prime losses in the financial system worldwide, and caused some European banks to balk at lending to other banks on normal terms.
After the Fed’s action Friday, interest rates on short-term Treasury bills plummeted. The yield on three-month T-bills dived to 4.54% from 4.78% on Thursday and 4.95% on Wednesday. The yield on six-month bills sank to 4.81% from 4.86%.
Yields on long-term Treasury bonds rose. The benchmark 10-year T-note rose to 4.81% from 4.77%.
The dollar was mixed against major currencies, and gold gained $8.90, or 1.3%, to $670.30.
Crude oil futures slipped 12 cents to $71.47 a barrel in New York.
In other market highlights:
Nvidia fell $2.14 to $43.99 after the producer of computer-graphics chips said third-quarter sales would increase 5% to 7% from a year earlier. Investors were looking for a forecast of at least 10% sales growth, Caris & Co. analyst Nicholas Aberle said.
Wyeth lost $2.99 to $46.59 after U.S. regulators rejected the drug maker’s bifeprunox for use in people with schizophrenia. The Food and Drug Administration needs a study showing that the pill is effective before the agency will consider approving it, Wyeth said.
Overseas, key stock indexes slid 2.4% in Japan, 4.2% in South Korea, 3.7% in Britain and 2.7% in Switzerland.
