Offer for Countrywide boosts market

The Fed said it is prepared to lower interest rates to ward off a recession.

NEW YORK (AP) — A volatile Wall Street advanced Thursday for the second day in a row, as investors found renewed confidence in a report that Bank of America Corp. is close to buying struggling mortgage lender Countrywide Financial Corp.

After seesawing earlier in the day, the Dow Jones industrials finished up nearly 120 points on the afternoon report from The Wall Street Journal. The stock market has been buffeted by concerns about fallout from the mortgage and credit crisis. Countrywide’s problems with delinquent and defaulting loans have sent stocks falling even in recent days.

Credit concerns were one reason the market waffled in earlier trading, with investors trying to reconcile comments on the economy from Federal Reserve Chairman Ben Bernanke and Kansas City Fed President Thomas Hoenig.

Stocks jumped after Bernanke said the Fed was ready to lower interest rates again to ward off a recession: “We stand ready to take substantive additional action as needed to support growth and to provide adequate insurance against downside risks,” Bernanke said.

But they bobbled up and down before turning narrowly mixed after Hoenig said later that inflation remains a concern and the stock market is “not the center of our attention.” The comments kept alive fears that the Fed may not respond to investor concerns even as it monitors the weakening economy.

But, said Jim Herrick, manager of equity trading at Baird & Co., Wall Street is worried that it will take a lot more than rate cuts to restore economic momentum. There’s still subprime issues and concerns about earnings, and the mortgage market.”

The Dow Jones industrial average rose 117.78, or 0.92 percent, to 12,853.09.

Broader stock indicators also rebounded. The Standard & Poor’s 500 index rose 11.20, or 0.79 percent, to 1,420.33, while the technology-heavy Nasdaq composite index rose 13.97, or 0.56 percent, to 2,488.52.

Bond prices fell as stocks rose. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.90 percent in late afternoon trading, up from 3.83 percent late Wednesday.

The stock market has rebounded over the past two days in volatile trading, having fallen sharply since the beginning of the year on worries about a recession. Some observers say the rush of corporate news expected in the coming weeks could overshadow discussions about the Fed, whose rate-setting committee isn’t scheduled to meet again until Jan. 29-30.