Stocks fall as S&P 500 closes below 700 for first time since 1996
NEW YORK -- Investors bruised by Wall Street's latest rout found little reason to pile back into the market. Stocks extended their losses in an erratic session Tuesday as investors wrestled with the reality that the economy is still far from a recovery.
The pessimism that has dominated the markets for months stifled some tentative bargain hunting and in the process unraveled several attempts at a rally.
The selling pushed the Standard & Poor's 500 index to its first close below 700 since Oct. 28, 1996. But the losses were modest compared with Monday, when the Dow Jones industrial average tumbled 300 points and both the Dow and the S&P 500 index registered lowest finishes in more than a decade.
Tuesday's fluctations came as Federal Reserve Chairman Ben Bernanke told Congress that an economic recovery depends on the government's ability to stabilize weak financial markets. He said the efforts were needed to avoid "a prolonged episode of economic stagnation."
Investors are still worried the government won't succeed. On Monday, the government injected $30 billion to troubled insurer American International Group, its fourth attempt to stabilize the company since September.
Bernanke's remarks came as the central bank announced it would begin lending up to $200 billion in an initial move to spur consumer and small business borrowing for autos, education, credit cards and other expenses. The Fed first announced the plan late last year.
That offered some support to the market and helped curb selling, traders said.
"I think people are just finally happy to see that it's here and that it's going to begin," said Joe Saluzzi, co-head of equity trading at Themis Trading. "Normally Wall Street will buy the rumor and sell on the news but I think this is kind of the opposite effect."
The Dow fell 37.27, or 0.6%, to 6,726.02. The index is now down more than 52% from its record of 14,164.53 set in October 2007.
Broader stock indicators also fell. The S&P 500 index slid 4.49, or 0.6%, to 696.33.
Related Stories
ABC News Live