U.S. Stocks Mostly Back In The Red

NEW YORK (MarketWatch) -- U.S. stocks were mixed Tuesday amid conflicting signals on whether the Federal Reserve would move again to address the address the credit crunch roiling the financial markets.

"No matter what happens the Fed will be there to save us, and let's buy stocks," said Peter Bookvar, equity strategist at Miller Tabak, who disagreed with the bullish sentiment.

The Dow Jones Industrial Average was 24.1 points lower at 13,097.5, with 18 of its 30 stocks trading lower, with the declines led by United Technologies Corp. and Exxon Mobil Corp., both of which were off more than 2%.

The Dow's advancing stocks included Home Depot Inc. , which gained 1.4%, and Verizon Communications Inc. , up 1.6%.

The S& P 500 moved 1.1 points ahead to 1,446.68.

The Nasdaq composite advanced 10 points to 2,518.8.

Volume at the New York Stock Exchange came to 1.1 billion shares, with advancing stocks outpacing decliners by around 4 to 3. At the Nasdaq, 1.4 billion shares were exchanged, and advancers ran slightly ahead of decliners.

Fed tools

Stocks scored solid gains after Sen. Chris Dodd, D-Conn., chairman of the Senate Banking Committee said Bernanke was ready to use "all the tools at his disposal" to ease the liquidity issues troubling Wall Street. Dodd, also a presidential contender, spoke to reporters after a closed-door meeting with Bernanke and Treasury Secretary Henry Paulson.

Stocks had opened lower in the immediate aftermath of televised comments by Paulson, who told CNBC that the economy remains strong, but conceded that "what's going on in capital markets will take a penalty."

"We are reassured the economy is strong but it's a long stretch to make the correlation to the markets in the short to median term. At the end of the day, it's not earnings and dividends; it's supply and demand and perceptions that move markets, said Elliot Spar, option/market strategist at Stifel Nicolaus & Co., in a Tuesday note.

Richmond Federal Reserve Bank President Jeffery Lacker added his voice to the mix, saying unless the economy is affected, extreme volatility in financial markets is not a justification for the Fed to cut its target for the overnight federal funds lending rate.

"Financial market volatility, in and of itself, does not require a change in the target federal funds rate, in my view," said Lacker in a speech to the Charlotte Risk Management Association.

Retailers register

Earnings reports from several retailers might help provide pockets of strength in the market, according to Peter Cardillo, chief market economist at Avalon Partners.

Target Corp. shares were up 1.1% after the discount giant reported improved gross margins and a larger contribution from its credit card division.

Shares of Saks Inc. fell 5.5% after the high-end retailer said it narrowed second-quarter losses to $24.6 million, or 17 cents a share, from $51.9 million, from 15 cents a share, a year ago.

Staples Inc. shares slid 0.6% after reported a less-than-expected 11% rise is profits.

Shares of Capital One Financial gained 2.7% after the credit card giant said it would close its wholesale mortgage business and cut 1,900 jobs.

Countrywide shares gained 9% after the Wall Street Journal reported the nation's largest mortgage lender could be bought out by Warren Buffett's Berkshire Hathaway Inc., which has nearly $50 billion in cash.

Dow component General Electric might sell its Japanese consumer-finance unit, according to the Nikkei business daily. Its shares were up 0.8%.

TXU Corp., which is in the midst of trying to get shareholders to approve its sale to KKR & Co., could be another target of Berkshire, the report said. Its shares gained 1.9%.

Other markets

Short-term bonds halted a six-day rally after a meeting between Federal Reserve Chairman Ben Bernanke, Treasury Secretar Henry Paulson and Sen. Chris Dodd, D-Conn., failed to signal an imminent rate cut.

The three-month T-bill, which rallied on Monday and again Tuesday morning, fell back, sending its yield 58 basis points higher to 3.77%.

The benchmark 10-year Treasury note was ahead 2/32 at 100 31/32, with a yield of 4.61%.

The dollar edged was mixed against major rivals, edging slightly lower against the Japanese currency down 0.5% at 114.29 yen, vs. 114.42 yen late Monday, while the euro was up 0.04% at $1.3475, vs. $1.3476.

And, with Hurricane Dean making landfall, but missing key oil installations, crude-oil futures fell, with the contract for September delivery declining 2.4%, or $1.67, to $69.45 a barrel on the New York Mercantile Exchange.

Elsewhere on the NYME, gold futures closed modestly lower for a second consecutive session, with gold for December delivery falling 30 cents to end at $666.20 an ounce.

By Kate Gibson