Stocks close mostly higher

Wall Street finished an extremely volatile session mostly higher Tuesday after investors, still jittery about mortgage-related problems at the nation’s major lenders, decided to interpret comments from the Federal Reserve as suggestive of another interest rate cut.

Stock indexes got a boost as oil reached another record, boosting energy stocks.

The Fed, in minutes from its Oct. 30-31 meeting, said its decision to lower rates for a second straight meeting “was a close call.” But in a separate economic forecast, the central bank pointed to slowing growth next year, an uptick in unemployment and moderating inflation -- which would seem to portend a possible rate decrease.

In the interest-rate futures market, however, the implied odds of a quarter-point rate cut to 4.25% at the Fed’s Dec. 11 meeting fell to 84%, down from 96% on Monday.

Though the markets are pricing in a high chance of a rate reduction next month, stock investors were on edge until the closing bell Tuesday, and the major share indexes changed direction several times as analysts sorted through the Fed statements.

Meanwhile, Freddie Mac posted a $2-billion quarterly loss Tuesday, escalating jitters about the government-sponsored mortgage lender and its larger counterpart, Fannie Mae.

Shares of Freddie Mac fell $10.76, or 29%, to $26.74, and Fannie Mae shares fell $9.33, or 25%, to $28.25.

Concerns about the giant home-loan funders pushed down shares of Countrywide Financial and even spurred speculation that it might file for bankruptcy protection, which the company denied. After plunging more than 20%, Countrywide shares ended down 29 cents, or 2.7%, at $10.28.

“When there’s lot of uncertainty in the market, the rumor mill runs full speed ahead,” said Peter Cardillo, chief market economist at New York-based brokerage house Avalon Partners Inc.

The S&P; 500 Financials index dropped 1.3% on the Freddie Mac news, putting the 93-stock gauge down 21% this year.

The Dow Jones industrial average rose 51.70 points, or 0.4%, to 13,010.14, after making 100-point swings throughout the day. On Monday the index tumbled more than 200 points.

The Standard & Poor’s 500 index rose 6.43 points, or 0.4%, to 1,439.70, and the Nasdaq composite index rose 3.43 points, or 0.1%, to 2,596.81.

The Russell 2000 index of smaller-company stocks fell 1 point, or 0.1%, to 749.33. Small-cap companies are seen as more vulnerable in a downturn, especially because they tend not to have the multinational presence that larger companies can rely on to maintain their profitability.

Declining issues narrowly outnumbered advancers on the New York Stock Exchange, where consolidated volume came to 4.74 billion shares, compared with 4.01 billion shares traded Monday.

Government bond yields finished mixed. The yield on the 10-year Treasury note rose to 4.10% from 4.07% late Monday.

In the oil market, crude futures rose $3.39, or 3.6%, to a record close of $98.03 a barrel on the New York Mercantile Exchange after setting a trading high of $98.62.

Shares of Exxon Mobil climbed $3.71, or 4.4%, to $87.82 on the record price of crude and an upgrade of the stock by UBS to “buy.” Chevron gained $2.87, or 3.4%, to $87.90.

The dollar hit a new low of the euro but rose against the yen. Gold jumped.

* Sears Holdings fell $2.35, or 2.1%, to $111.85. The parent of the Kmart and Sears chains bought a 14% stake in Restoration Hardware and said it might bid for the retro-themed retailer, which has a pending agreement to be acquired by private equity firm Catterton Partners for $267 million. Restoration Hardware climbed 85 cents, or 13%, to $7.18.

Among other retailers, Target slumped $2.21, or 4.1%, to $51.69 after weak sales of high-margin items such as clothing and home furnishings were blamed for a 4% drop in third-quarter profit. Nordstrom rallied $3.69 to $34.21 after reporting third-quarter profit that topped analyst expectations.

* D.R. Horton rose 28 cents to $11.53 despite the home builder’s report of a fourth-quarter loss on huge charges to write down inventory and land options and few signs of improvement in the housing market.

* Google surged $22.69, or 3.6%, to $648.54 after a Credit Suisse analyst said the stock could hit $900 in the coming year. “Tremendous value will be created for Google shareholders,” analyst Heath Terry wrote, “as all advertising goes digital . . . Google becomes the de facto ‘operating system’ for advertisers.”

* Medtronic added $3.17, or 7%, to $48.42. The largest maker of heart-rhythm devices reported better-than-expected sales for its latest quarter.

* Internap Network Services sank $1.05, or 8.9%, to $10.70. Its chief financial officer is leaving the Internet business service provider to pursue private equity investments.

* GameStop slid $1.98, or 3.7%, to $51.01 after the video game retailer projected lower fourth-quarter earnings than analysts expected.

* Stock markets overseas advanced. Key indexes rose 1.1% in Japan and Hong Kong, 1.7% in Britain, 1.6% in Germany and 1.4% in France.