Market pares back early losses

NEW YORK – Wall Street pared its losses to finish mostly flat Thursday but remained uneasy after disappointing results from Bank of America Corp. provided further evidence that the credit crisis is hurting the economy.

The Dow Jones industrial average, which fell as much as 60 points early in the session, rebounded as bargain hunters entered the market, betting Thursday’s dismal data could convince the Federal Reserve to lower rates again.

Still, investors remained spooked after Bank of America – considered a bellwether for the banking industry because it has branches across the country – said “significant dislocations” in the capital markets sent third-quarter profits down 32 percent. Citigroup Inc. and Washington Mutual Inc. reported similar results in recent days.

Banks and brokerages have been hurt during the third quarter in the fallout from the subprime mortgage crisis. As people with weak credit defaulted on loans at an alarming rate, it triggered a global aversion for risk that led the credit markets to freeze up.

Treasury rallied and the dollar fell to a new low against the euro after the Labor Department said the number of newly laid-off workers filing claims for unemployment benefits shot up last week by the largest amount since February. The report was far worse than economists expected, and signaled that the labor market could be starting to weaken from a downturn in housing and the global credit turmoil.

“There are so many factors going on right now between the dollar getting crushed, oil moving higher, and news out of the banking sector,” said Greg Church, chief investment officer of Church Capital Management. “Yet, it is amazing to me that this market continues to lift its head. The market came back somewhat because there’s that whole camp that thinks any bad news is good news that the Fed will lower rates.”

The Dow fell 3.58, or 0.03 percent, to 13,888.96.

Broader indexes finished mixed. The Standard & Poor’s index fell 1.16, or 0.08 percent, to 1,540.08, while the technology-heavy Nasdaq composite index added 6.64, or 0.24 percent, to 2,799.31. Tech shares have outperformed this week as some investors lately regard profits at some of these companies to better withstand an economic slowdown.

Overseas, Japan’s Nikkei stock average closed up 0.89 percent. Britain’s FTSE 100 fell 1.02 percent, Germany’s DAX index fell 0.80 percent, and France’s CAC-40 fell 0.89 percent.