NEW YORK " Wall Street rose in seesaw trading Wednesday after a huge rally triggered by the Federal Reserve's plans to pump liquidity into distressed financial markets.
Some investors, as expected, cashed in profits after the Dow Jones industrial average surged 416 points Tuesday, the blue chips' biggest one-day point gain since 2002. Still, the tone in markets around the world is clearly improved as investors appear hopeful the Fed's plan can help jump-start the moribund credit markets.
The ability of the stock market to largely hold its gains " at least initially Wednesday " allowed some investors the hope that perhaps the rally will hold and not go down as a one-day pop.
Investors snapped up stocks Tuesday after the Federal Reserve said it would lend Treasurys in exchange for mortgage-backed securities and other battered debt that all but collapsed in the subprime mortgage crisis. Global financial institutions have written down almost $200 billion due to the credit crisis, and big U.S. investment banks next week are expected to report more losses when they issue first-quarter results.
Wall Street largely regarded the Fed's plan " conducted alongside other big central banks outside the U.S. " as an innovative way to bring relief to the credit markets without simply further cutting interest rates and risk sparking inflation.
In midmorning trading, the Dow Jones industrial average rose 69.44, or 0.57 percent, to 12,226.25, recovering from an earlier loss.
Broader stock indicators also rose after falling earlier. The Standard & Poor's 500 index rose 4.64, or 0.35 percent, to 1,325.29, and the Nasdaq composite index rose 12.57, or 0.56 percent, to 2,268.33.
Treasury prices fell. The yield on the 10-year Treasury note, which moves opposite its price, fell to 3.55 percent from 3.59 percent late Tuesday. The dollar was mixed against other major currencies, and the dollar sank to another record low against the euro. Gold prices rose.
Investors remain cautious about economic data due out later this week, and what the Fed will do when it meets next Tuesday. Wall Street still wants rate cuts but is concerned about inflation and that even rate cuts might not be enough to help the economy.
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On the Net:
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
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