Stocks decline and then recuperate
NEW YORK – Wall Street closed mixed Tuesday, recuperating from a sharp plunge as investors snapped up bargain stocks on rumors that a bond insurer rescue plan is progressing and upbeat comments from Cisco Systems Inc.
Earlier in the session, the market sank after Merrill Lynch lowered its full-year earnings prediction for Citigroup Inc., which a Dubai fund executive said will need to raise more cash to stay in business.
Another damper on trading was Intel Corp., which lowered its forecast for first-quarter profit margins.
But in afternoon trading, the stock market showed signs of optimism. The financial sector regained some steam after CNBC reported that a plan to save the bond insurer Ambac Financial is advancing nicely.
Technology stocks rebounded too after a Dow Jones Newswires report that Cisco CEO John Chambers said he is “even more comfortable” with the long-term growth targets the company has outlined.
Wall Street is jittery, however, and as the volatility of the past several months has proved, the market’s optimism can quickly turn to pessimism from one day to the next.
While some investors search for bargains when stocks sink, the overall market is plagued by persistent worries about the bad debt held by the world’s banks.
The Dow Jones industrial average fell 45.10, or 0.37 percent, to 12,213.80, after tumbling more than 200 points earlier in the day.
Broader stock indicators finished mixed, also rebounding off their lows of the session. The Standard & Poor’s 500 index fell 4.59, or 0.34 percent, to 1,326.75, while the Nasdaq composite index rose 1.68, or 0.07 percent, to 2,260.28.
Bond prices sank as stocks regained their footing. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.63 percent from 3.56 percent late Monday.
Citigroup, a Dow component, fell 99 cents, or 4.3 percent, to $22.10, after hitting a new nine-year low.
The head of a government-owned investment firm in Dubai said Citigroup would need to raise more than the nearly $20 billion it has already nabbed over the past few months to fix its debt problems.
Other banks declined alongside Citi, including Dow components Bank of America Corp. and JPMorgan Chase & Co. Bank of America fell $1.05 to $79.62, and JPMorgan fell 63 cents to $39.19.
Ambac rose 78 cents, or 7.9 percent, to $10.72, while MBIA Inc., another bond insurer, rose 36 cents, or 2.9 percent, to $12.98.
After calming words from its CEO, Cisco recovered from its lows to close down 11 cents at $24.29.
Another Nasdaq stock, Amazon.com, shot up $2.91, or 4.7 percent, to $65.34 on comments from its chief financial officer about the online retailer’s 2008 revenue forecast.