Wall Street closes mixed

Wall Street ended another erratic session mixed on Tuesday as investors, waiting for the Federal Reserve's next move to steady the markets, made few big commitments to stocks.

Comments from policymakers and government officials tugged at a market looking for any evidence the Fed will cut rates to help contain the credit crisis that began with the failure of subprime loans.

The Fed has taken a number of steps to prop up the nation's financial institutions ahead of its scheduled September 18 meeting, including injecting more liquidity into the banking industry and cutting the discount rate.

But many on Wall Street want the Fed to do more, including lowering the more important federal funds rate, and to do it before next month's meeting.

Shrinking credit

Traders reacted positively to comments from Senate Banking Committee Chairman Christopher Dodd who said Fed Chairman Ben Bernanke isn't satisfied with Wall Street's response to his efforts to stabilize markets torn by anxiety about shrinking credit.

Dodd, after a meeting with Bernanke and Treasury Secretary Henry Paulson, said policymakers plan to use "all tools available" to complete its mission.

But that bullishness cooled after Fed President Jeffrey Lacker said the central bank's policy must be guided by fundamentals, rather than market swings, indicating that a cut in the fed funds rate cut might not be among the tools the Fed plans to use.

The 30-stock Dow Jones industrial average fell 30.49, or 0.23 per cent, to 13,090.86 after moving in and out of positive territory throughout the day.

Broader market indexes were slightly higher. The Standard & Poor's 500 index rose 1.57, or 0.11 per cent, to 1,447.12, and the Nasdaq composite index rose 12.71, or 0.51 per cent, to 2,521.30. The Russell 2000 index of smaller companies added 0.93, or 0.12 per cent, to 788.38.

Advancing issues outnumbered decliners by about 3-to-2 on the New York Stock Exchange, where volume came to 1.35 billion shares.

Bonds rally

Bonds continued to rally as more investors moved money from stocks to the safer haven of the Treasury market.

The yield on the benchmark 10-year Treasury note fell to 4.59 per cent from 4.63 per cent late Monday. Bond prices move opposite yields.

The day's trading session echoed the erratic pattern seen Monday, when the Dow changed course several times and swung in a 200-point range before closing only slightly higher.

However, Wednesday's volatility was much more mild, free from triple-digit swings, as investors took a more cautious tone.

Trading also reflected speculation that the global credit crunch is nowhere near over. Countrywide Financial Corp. was said to be a takeover target due to losses linked to distressed subprime mortgages.

Investors expected more layoffs after Capital One Financial Corp. said it was shuttering its GreenPoint Mortgage unit and slashing 1,900 jobs. Capital One shares rose $1.75, or 2.6 per cent, to $68.47; Countrywide spiked $1.98, or 10 per cent, to $21.79.