Stock prices stabilized in afternoon trading as a Federal
Reserve assessment of the economy reassured nervous investors that there is little evidence of inflation.
The Dow Jones industrial average closed up 60.5 points at 9,856.53, making up some of the nearly 375 points it lost in
Tuesday's plunge. The Nasdaq composite index was up 49.63 points
at 4,897.47, while the Standard & Poors Index ended the day 11.12 points higher at 1,366.74.
Both the Dow and Nasdaq changed direction several times in the morning, but both were solidly higher in midafternoon, after the Fed released its
"beige book" assessment of economic conditions. It reported that
while workers' wages are rising, there is little evidence of
inflation in the overall economy.
The report gave investors their first real impetus to buy today. It convinced them that the Fed, which has raised interest rates
four times since June to try to control inflation, might not have
to push rates sharply higher in the coming months.
Still, investors remained uncertain about the outlook for
corporate profits after the surprise announcement by Procter &
Gamble set off massive selling on Wall Street. The consumer products maker said higher raw materials prices would hurt its profits for the rest of the company's fiscal year.
The market was completely unnerved by the fact that even Procter & Gamble, whose products include consumer staples such as Crest toothpaste and Tide detergent, could be vulnerable to earnings problems, and investors began to sell off a broad range of stocks in fear that other companies also would have trouble meeting their earnings projections.
Investors may be particularly jittery because many stocks are priced to perfection. Any bad news could unravel Wall Street's confidence and send stocks lower in mass.
On Tuesday, the Dow lost 374.47 and ended at 9,796.03, its lowest close in nearly a year. It is now down about 14 percent for the year.
Even the technology-dominated Nasdaq, which has been relatively immune from profit concerns lately, has been hit hard. The index made a brief foray past 5,000 for the first time Tuesday, but it
eventually fell victim to widespread selling, and analysts said
investors uncertain about the market's direction collected
some profits today.
Still, the Nasdaq, which has outperformed the Dow for months as investors scooped up high-tech stocks, is up about 19 percent so
far this year.
The markets watched closely today as Federal Reserve Chairman
Alan Greenspan spoke at a banking conference. However, analysts
said his comments, which focused on lending practices of small
banks, did not appear to affect stock trading.
The Associated Press and Reuters contributed to this report