Wall Street ended a mildly erratic day slightly lower Thursday after anxiety about widening credit problems offset investor optimism about a $2 billion capital infusion into troubled mortgage lender Countrywide Financial Corp (CFC).
According to preliminary calculations, the Dow fell 0.25, or less than 0.01 percent, to 13,235.88.
Broader indexes fell modestly. The Standard & Poor's 500 index lost 1.57, or 0.11 percent, closing at 1,462.50, and the Nasdaq composite index fell 11.10, or 0.43 percent, to 2,541.70
Bank of America Corp.(BAC) announced late Wednesday it will invest the money into the nation's largest mortgage lender to help it better weather problems with defaulting subprime loans. The investment was seen as a way to not only prop up Countrywide, but also prevent any further losses at the mortgage lender from hurting the underlying economy. Countrywide's CEO Angelo Mozilo expressed his optimism about the deal in an interview on CNBC on Thursday, but when asked if the housing slump could cause a recession, he agreed.
The market will likely be trading nervously "until we get some clarity from the Fed," said Jim Herrick, manager and director of equity trading at Baird & Co.
The Federal Reserve's moves to ease the market's credit concerns, including cash injections into the banking system and a lower discount lending rate to banks, have had some palliative effect on Wall Street, evidenced by the ebbing of the extreme volatility of recent weeks. But regarding the Fed's moves and Bank of America's investment in Countrywide, "some would argue that this is a Band-Aid approach to a bigger problem ... The big unknown is how widespread this problem is," Herrick said.
The Countrywide CEO's comments "probably didn't help" the market, he said. "They're the biggest lender in America."
The market showed little response Thursday to policymakers' infusion of another $17.25 billion into the banking system to help boost liquidity, adding to the $41.25 billion the central bank has injected since the beginning of last week.