Stocks Waver on Credit Concerns

NEW YORK -- Wall Street tottered in search of a direction Tuesday as more credit problems emerged, raising investors' anxiety about what the Federal Reserve might do next to steady the markets and the economy.

Speculation grew on Wall Street that troubled Countrywide Financial Corp. might be a takeover target due to losses linked to distressed subprime mortgages. And, investors expected more layoffs after Capital One Financial Corp. said it was shuttering its GreenPoint Mortgage unit and slashing 1,900 jobs.

Wall Street remains worried that a broadening credit crisis triggered by distressed subprime loans will curtail borrowing to the point where it hurts companies across the economy. The Fed has taken a number of steps to prop up the nation's financial institutions, including injecting more liquidity into the banking industry and cutting the discount rate.

But many on Wall Street want the Fed to do more, including lowering the more important federal funds rate. And that could be a topic of discussion when Fed Chairman Ben Bernanke and Treasury Secretary Henry Paulson meet Tuesday afternoon with Senate Banking Committee Chairman Christopher Dodd to discuss the market's recent turbulence.

Target Corp. and a number of other retailers reported mostly lackluster second-quarter earnings before the open, giving investors little to trade off of. However, BJ's Wholesale Club Inc. posted better-than-expected results.

In the first hour of trading, the Dow Jones industrial average fell 14.80, or 0.11 percent, to 13,106.55, having moved in and out of positive territory.

Broader stock indicators were mixed. The Standard & Poor's 500 index was down 0.87, or 0.06 percent, at 1,444.68, and the Nasdaq composite index edge up 2.02, or 0.08 percent, to 2,510.61. The Russell 2000 index of smaller companies rose 1.80, or 0.23 percent, to 789.25.

The session followed the erratic pattern of Monday, when the Dow changed course several times and swung in a 200-point range before closing only slightly higher. Traders have been trying to find their footing following the Fed's decision to cut the discount rate on Friday.

Bonds were flat, with the yield on the benchmark 10-year Treasury note at 4.60 percent. Investors have bailed out of stocks due to recent volatility, and moved swiftly into safer investments like Treasuries.

The dollar mixed against other major currencies, while gold prices up.

Oil prices fell 28 cents to $70.84 in premarket trading on the New York Mercantile Exchange. Investors have been wary as Hurricane Dean picks up pace toward Mexico, where major oil companies like state-run Pemex Oil have already battened down oil rigs in the Gulf of Mexico.

With no major economic reports scheduled, investors are expected to pore over a number of earnings reports from retailers to gauge the health of consumer spending.

Capital One shares rose 13 cents at $66.85 after it announced changes to its mortgage lending strategy. Meanwhile, rumors that Countrywide might be vulnerable to a takeover attempt sent its shares up 72 cents at $20.54.

BJ's Wholesale Club said second-quarter profit spiked 37 percent, topping Wall Street expectations. The company, which operates 175 warehouse-style stores in the U.S., said sales rose 8 percent. Shares rose $1.54, or 5 percent, at $32.33.

Target rose 76 cents to $59.85 after it reported second-quarter profit matched Wall Street projections.

Staples Inc., the largest U.S. office supplies retailer, reported a higher quarterly profit on Tuesday, matching Wall Street projections. However, it issued a cautious forecast for the rest of the year. The stock fell 30 cents at $23.01.

Luxury retailer Saks Inc. narrowed its second-quarter loss, but missed Wall Street projections. The department store operator also provided a lackluster sales outlook, and shares fell 21 cents at $17.73.

Overseas, Britain's FTSE 100 rose 0.46 percent, Germany's DAX index rose 0.79 percent, and France's CAC-40 rose 0.84 percent. In Asia, Japan's Nikkei stock average rose 1.07 percent. Hong Kong's Hang Seng Index rose 0.62 percent.

China's central bank said Tuesday it would raise its benchmark lending and deposit rates to curb inflation. The often-volatile Shanghai Composite Exchange rose 1.03 percent.

Editor's note:
The 99 stocks you need to dump in 2007 . . . and the 10 to buy! Get our free report today.
Will the Liquidity Crisis Sink Your Stocks? 12 Ways to Profit.
Sir John Templeton Was Right. Get His Latest Insight on Housing and Markets.