NEW YORK — Wall Street finished a volatile session mixed Monday as investors grappled with the possibility that the Federal Reserve might not lower interest rates as much as they hope.
The stock market ratcheted up and down throughout the day, with Wall Street still nervous after Friday's dismal employment report. The data, which showed the first monthly decline in jobs in four years, rekindled fears about housing and credit market weakness bleeding into the overall economy and squeezing consumer spending.
Speeches from Fed officials Monday seemed to give investors a bit more reason to be optimistic about the economy, but the officials avoided hinting at how the central bank might alter rates.
San Francisco Fed President Janet Yellen said that while market turmoil has the potential to hurt the economy, rate policy should not be used to shield investors from losses. Dallas Fed President Richard Fisher said the economy appears to be "weathering the storm," and Atlanta Fed President Dennis Lockhart said investors should consider Friday's unemployment report in the context of a mostly strong batch of retail sales reports.
For many investors, a rate cut after more than a year of the Fed standing pat on rates is practically a given. The debate, as they see it, is whether the Fed on Sept. 18 will reduce rates by a quarter percentage point or a half percentage point to loosen up the tight credit markets _ and also, if the central bank will continue to reduce rates as the year goes on.
There could be a major sell-off if the Fed doesn't reduce rates next week, said Scott Fullman, director of investment strategy for I. A. Englander & Co. And until then, movements will likely to be choppy, and exaggerated by low trading volumes. "It's very volatile here, but we're not seeing a tremendous amount of volume. People are on the sidelines. I think people want to be convinced of what's happening before they get back in."
The Dow Jones industrial average rose 14.47, or 0.11 percent, to 13,127.85, after falling 250 points on Friday and switching directions several times throughout the session Monday.
Broader stock indexes fell. The Standard & Poor's 500 index slipped 1.85, or 0.13 percent, to 1,451.70, and the Nasdaq composite index declined 6.59, or 0.26 percent, to 2,559.11.
Bond prices rose as stocks slipped, pushing the yield on the benchmark 10-year Treasury note down to 4.27 percent from 4.37 percent late Friday.
Stocks experienced a short relief rally in afternoon trading after Gen. David Petraeus said to Congress that he recommended to President Bush that the drawdown of U.S. forces from Iraq start this month, said Alfred Goldman, chief market strategist at A.G. Edwards & Sons Inc. But the gains were quickly lost.
Fresh economic data was sparse Monday. The one notable report came from the Federal Reserve, which said consumer credit rose at an annual rate of 3.7 percent in July, down from a 5.9 percent growth rate for consumer debt in June.
The Russell 2000 index of smaller companies fell 5.98, or 0.77 percent, to 769.81.
Declining issues outnumbered advancers by about 5 to 3 on the New York Stock Exchange, where consolidated volume came to 2.85 billion shares, down from 3.19 billion on Friday.
On Friday, the Labor Department's jobs report further depressed a market already uneasy about a lackluster housing market, tightening availability of credit and a rise in mortgage defaults. Because of Friday's retrenchment, the three major indexes all lost more than 1 percent for the week.
While some investors had hoped for weak data to help the Fed justify cutting interest rates when it meets next week, the market was shocked by a loss in jobs when a gain had been expected. With consumer spending accounting for about two-thirds of economic activity, Wall Street is concerned about any loss in employment that would make consumers hesitant to spend.
On Monday, the market absorbed more news of fallout from mortgage failures. Countrywide Financial Corp. said after the closing bell Friday it would cut as many as 12,000 jobs _ up to 20 percent of it work force _ as the mortgage lender tries to ride out upheaval in the mortgage industry. The company expects new mortgages to fall 25 percent next year.
Countrywide fell $1, or 5.5 percent, to $17.21.
Not all financial stocks were weak, though _ British billionaire Joseph Lewis, a magnate who controls more than 170 companies, acquired a 7 percent stake in investment bank Bear Stearns Cos. Bear Stearns rose $2.13, or 2 percent, to $107.50.
Some technology stocks were also strong. Advanced Micro Devices Inc. rose 33 cents, or 2.6 percent, to $12.94 after releasing its newest microprocessor, and Apple Inc. rose $4.94, or 3.8 percent, to $136.71 after selling its 1 millionth iPhone on Sunday.
Intel Corp. initially rose after boosting its third-quarter sales outlook, but finished down 12 cents at $25.35.
Light, sweet crude futures for October delivery rose 79 cents to $77.49 a barrel on the New York Mercantile Exchange.
The dollar slipped against most other major currencies, while gold prices, which have risen sharply in recent weeks amid concerns about the strength of the U.S. dollar, extended their gains. A rate cut by the Fed could hurt dollar-denominated assets, prompting some investors to shift into gold.
Overseas, Japan's Nikkei stock average fell 2.22 percent. Britain's FTSE 100 fell 0.92 percent, Germany's DAX index fell 0.82 percent, and France's CAC-40 fell 0.80 percent.
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