Stocks rise in wild session

Wall Street ended a wild session Wednesday moderately higher after the Federal Reserve unveiled a plan to work with other central banks to alleviate the global credit crisis.

Stocks soared at the opening on news of the banks’ plan, with the Dow index rising as much as 272 points. But the market then sold off for most of the rest of the session and was briefly in the red before rising near the closing bell.

Downbeat forecasts from Bank of America, Wachovia and PNC Financial Services offset optimism that the central banks could help ease the financial system’s troubles, analysts said.

“There’s still no certainty that we’re out of the woods,” said Steven Goldman, market strategist at Weeden & Co. “There’s still a risk for recession.”

The Dow Jones industrials ended with a gain of 41.13 points, or 0.3%, at 13,473.90.

The Dow had plummeted 294 points Tuesday after Fed policymakers cut two benchmark short-term interest rates by a quarter of a point -- less than the half of a point some nervous investors had been hoping to see.

Under the plan announced Wednesday morning, the Fed said it would lend at least $40 billion to cash-strapped U.S. banks starting next week and could boost that total. The Fed also will work with the European Central Bank and the Swiss National Bank to help meet banking-system demand for dollars in Europe.

Some banks that have been hit by surging losses on mortgage-related securities have found it difficult to get the short-term funding they need from other lenders.

The Fed’s plan initially cheered investors who had feared that the central bank’s modest rate cuts Tuesday indicated that policymakers weren’t taking the credit crunch seriously.

“I think it’s certainly a strong measure . . . and I think it will encourage banks to use the discounted borrowing,” said Jack Ablin, chief investment officer at Harris Private Bank in Chicago. “If banks won’t lend to each other, then at least the central banks will lend to them.”

But the forecasts by Bank of America, Wachovia and PNC Financial triggered renewed selling in financial shares and pulled the broader market off its highs.

The Standard & Poor’s 500 index was up as much as 2.3% but ended with a gain of 0.6%, or 8.94 points, at 1,486.59. The index had tumbled 2.5% on Tuesday.

The Nasdaq composite, which sank 2.4% on Tuesday, gained 18.79 points, or 0.7%, to 2,671.14.

Advancing issues led decliners by 8 to 7 on the New York Stock Exchange. Trading was active.

Even as many stocks surrendered their morning gains, key indexes were boosted by strength in energy shares after the government reported surprising declines in U.S. stockpiles of crude oil. Crude futures jumped $4.37 to $94.39 a barrel in New York, a two-week high.

In other trading, some investors dumped Treasury securities, pushing yields sharply higher. The prospect of more available credit from central banks lessened investors’ need for the perceived haven of government securities, analysts said.

The 10-year Treasury note yield jumped to 4.09% from 3.97% on Tuesday.

The dollar was mixed against other major currencies. Gold prices edged up.

Among the day’s market highlights:

* Bank of America slid $1.22 to $43.43 after warning of a substantial fourth-quarter provision for loan losses.

Wachovia fell $1.42 to $40.53 and PNC slumped $2.51 to $68.25 after both also warned of higher loan-loss provisions.

Also in the banking sector, Citigroup plunged $1.76, or 5.3%, to $31.47 after banking analysts at brokerage Morgan Stanley said Citigroup stock was their “top short idea for 2008” -- meaning a bet that the share price would decline.

* Among other financial stocks, Countrywide Financial lost 80 cents to $10.53 and IndyMac fell 97 cents to $6.64. Goldman Sachs gained $1.43 to $212.58 but had traded as high as $220.85 early in the day.

* In the energy sector, Chevron rose $1.89 to $91.78 and BP jumped $1.60 to $76.10.

* AT&T; climbed for a second straight session after the telecom carrier issued a solid forecast and lifted its dividend 13%. The stock surged $2.25, or 5.7%, to $41.71. Rival Vodafone gained $1.65 to $38.09.

* 3M rallied $2.01 to $86.66 after predicting that 2008 sales and earnings would rise at double-digit rates.

* Overseas, key stock indexes fell 0.7% in Japan and 2.4% in Hong Kong, but shares added 0.4% in Britain, 0.8% in Germany and 0.3% in France.