Stocks fluctuate, turn lower as investors listen to hearing on bailout
— -- Financial markets were cautious Tuesday, with stocks fluctuating after Monday's huge sell-off as top economic officials updated Congress about efforts to hammer out a $700 billion financial rescue for troubled credit markets.
In afternoon trading, the Dow Jones industrial average was down 101.79, or 0.92%, to 10,913.90 after having risen more than 125 points in the early going. On Monday, the Dow fell more than 370 points as unease over the government rescue plan sent investors scrambling for the safety of hard assets like oil and gold.
Broader stock indicators alsoreversed course and turned lower. The Standard & Poor's 500 index was down 14.79, or 1.23%, to 1,192.30, and the Nasdaq composite index fell 18.53, or 0.85%, to 2,160.45.
Approval of the federal bailout plan is critical in the minds of investors since there are continual signs the underlying economy is weak, says Peter Cardillo of Avalon Partners. Investors are eager to see whether the plan, which involves spending $700 billion to quarantine bad mortgage-backed investments, will get approved in a form that helps speed up the economy's recovery.
Help may be needed as there are ongoing signs of economic weakness. For instance, holiday sales are forecast to grow at their slowest pace in six years due to the strains of a weak job market and high energy costs, says the National Retail Federation.
And there's still fallout from the financial crisis for investors to deal with. American International Group, the insurance company bailed out last week by the federal government, said it will begin selling assets next week. The insurer plans to raise money to pay back the loan given to it by the federal government.
Some of the intense worries that flared up Monday eased Tuesday. The price of an ounce of gold, which spiked Monday as investors fled the dollar fearing inflation, fell 1.2% to $898.00. Light, sweet crude for November delivery fell $2.27 to $107.10 on the New York Mercantile Exchange. Part of today's decline was due to slightly lower fear of inflation. But a big factor behind Monday's $16 surge was that Monday was the final day for the October contract, leading to increased volatility.
