NEW YORK — Wall Street ended an erratic session mixed Monday as investors grew more confident that the Federal Reserve will lower interest rates again to ward off recession and as they also wrestled with worries about the upcoming earnings season.
The market contended as well with a resurgence of tensions between the U.S. and Iran.
Investors have grown more optimistic about a rate cut at the Fed's Jan. 29-30 meeting after last week's disappointing reports on jobs and manufacturing pointed to a slowing in the economy during December. And, they might get some clues about the central bank's stance when its chairman, Ben Bernanke, delivers a speech on Thursday.
That optimism kept stocks from falling far during a session that saw the major indexes reverse course several time. But Wall Street remained uneasy as it awaited fourth-quarter earnings season, which unofficially starts Wednesday, when aluminum producer Alcoa Inc. posts results. Analysts said investors will be paying particular attention to financial services stocks that have been hit hard by the ongoing credit crisis.
"It's a directionless market with very little for investors to sink their teeth into," said Jack A. Ablin, chief investment officer at Harris Private Bank, of Monday's trading. He noted that the Standard & Poor's 500 stocks still appear overvalued right now ahead of a fourth-quarter earnings season that most investors are pessimistic about.
"The puzzle pieces are not aligning for the stock market right now," Ablin said.
A warning from the White House to Iran also kept volatility high, following an incident involving that country's forces and three U.S. Navy ships in the Strait of Hormuz on Sunday.
The Dow Jones industrial average rose 27.31, or 0.21 percent, to 12,827.49, after moving in and out of positive territory throughout the session.
Broader stock indicators ended mixed. The S&P 500 index rose 4.55, or 0.32 percent, to 1,416.18, and the tech-focused Nasdaq composite index fell 5.19, or 0.21 percent, to 2,499.46.
It was seventh straight session of losses for the Nasdaq, which greatly outperformed the Dow and the S&P in 2007.
Last week, in just the first three trading days of 2008, the Dow lost 3.50 percent, the S&P 500 index fell 3.86 percent, and the Nasdaq dropped 5.57 percent.
Bond prices continued to rise Monday after a rally during the past week. The yield on the benchmark 10-year Treasury note, which moves opposite its price, dipped to 3.84 percent from 3.87 percent late Friday.
"I have the feeling the market wants to hear some good news, and that one of these days we're going to get it and see a tremendous move higher," said Matt Kelmon, portfolio manager of the Kelmoore Strategy Funds. "We pretty much know the Fed is going to lower rates again, but the real catalyst might come from some of these earnings reports."
A speech on the housing market by Treasury Secretary Henry Paulson Monday offered little in a way of consolation for the market. Paulson said a correction in the housing market is "inevitable and necessary," and that while the Bush administration is working to solve the mortgage crisis, "there is no single or simple solution that will undo the excesses of the last few years."
The potential of conflict with Iran, one of the world's largest oil producers, triggered some concerns that crude prices would build on last week's record $100 a barrel. But instead, oil fell on the belief a cooling global economy will decrease demand for energy.
A barrel of light sweet crude tumbled $2.82 at $95.09 on the New York Mercantile Exchange. The dollar rose against most major currencies, while gold declined.
In corporate news, Time Warner Inc. fell 11 cents to $15.80 after the entertainment company announced it plans to release high-definition movies on Blu-ray rather than Toshiba Corp.'s HD DVD formal. Blu-ray is owned by Sony Corp.
Napster Inc. fell 2 cents to $1.97 after the online music service announced plans to offer downloads as unprotected MP3 files. Previously, users were not able to play Napster downloads on music players.
Technology stocks could fluctuate further as more news comes out of the Consumer Electronics Show, being held in Las Vegas this week.
Krispy Kreme Doughnuts Inc. Chief Executive Daryl Brewster resigned for personal reasons, amid a sputtering turnaround effort for the Winston-Salem, N.C.-based company. Shares rose 32 cents, or 11.3 percent, to $3.15.
There was also management reshuffling at Sallie Mae, which rose $1.16, or 7 percent, to $17.83 after plunging Friday. SLM Corp. named veteran banking industry executive Anthony P. Terracciano chairman, while Albert L. Lord, who was chairman for three weeks, was appointed vice chairman and will remain CEO.
The Russell 2000 index of smaller companies advanced 2.35, or 0.33 percent, to 723.95.
Advancing issues outpaced decliners by 9 to 7 on the New York Stock Exchange. Consolidated volume came to 4.10 billion shares, up from 4.05 billion shares Friday.
Overseas, Japan's Nikkei stock average closed down 1.30 percent. Britain's FTSE 100 fell 0.20 percent, Germany's DAX index added 0.11 percent, and France's CAC-40 was up 0.11 percent.
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