Fed Again Tries to Calm Wall Street, But Dow Has an Up-and-Down Day
Associated Press
Saturday, August 11, 2007; Page D03
NEW YORK, Aug. 10 -- Wall Street closed out a difficult week with a mixed finish Friday after the Federal Reserve added $28 billion to the banking system to calm markets worried about evaporating credit.
The Dow Jones industrials, down more than 200 points during the session, ended the day slightly lower, but nonetheless posted a gain of 0.44 for the week. The Dow closed at 13,239.54, down 31.14. On Thursday, the Dow fell 387 points and extended a series of triple-digit moves that began in late July.
Graphic How and Why the Fed Pumps Money Into the Financial System Banks are required to maintain certain cash reserve levels overnight, and frequently have to borrow from other banks to keep their reserves. The Federal Reserve's federal funds rate is the interest rate charged on overnight loans between banks. The current rate is 5.25%. |
Among broader indicators, the Standard & Poor's 500-stock index rose 0.55, to 1453.64. The Nasdaq composite index fell 11.60, to 2544.89. For the week, the S&P was up 1.44 percent and the Nasdaq rose 1.34 percent.
The Fed added $19 billion in liquidity to the market Friday morning, followed by $16 billion and $3 billion later in the day. On Thursday, the Fed added $24 billion.
The stock market, which has been gyrating for weeks over fears that credit was drying up, pared its losses after the Fed's cash infusions and comments that it would do all it could to "facilitate the orderly functioning of financial markets." The steep declines, however, showed the depths of fear that had some investors retreating from stocks.
"It's encouraging because it's a proactive step and they're not just focused on the inflation numbers and not ignoring turmoil in the credit market," said John Miller, head of the fixed income funds at Nuveen Asset Management.
The Fed's moves late in the week came after its August meeting Tuesday at which it left short-term interest rates unchanged at 5.25 percent, as it has done for more than a year. In a statement after the meeting, the bank said its primary concern remained inflation.
Movers
Countrywide Financial fell 80 cents, to $27.86. The biggest U.S. mortgage lender said "unprecedented disruptions" in debt markets could continue or worsen.
Bradley Pharmaceuticals rose $1.84, to $17.13. The drug developer three potential buyers and plans to pursue a sale.
HealthSpring rose $2.29, to $19. The managed-care company plans to buy privately held Leon Medical Centers Health Plans for $355 million.
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