On Wall Street, modest losses

NEW YORK (AP) — Investors bruised by Wall Street’s latest rout found little reason to pile back into the market.

Stocks extended their losses in an erratic session Tuesday as investors wrestled with the reality that the economy is still far from a recovery.

The pessimism that has dominated the markets for months stifled some tentative bargain hunting and in the process unraveled several attempts at a rally.

The selling pushed the Standard & Poor’s 500 index to its first close below 700 since Oct. 28, 1996. But the losses were modest compared with Monday, when the Dow Jones industrial average tumbled 300 points and both the Dow and the S&P 500 index registered their lowest finishes in more than a decade.

Tuesday’s fluctuations came as Federal Reserve Chairman Ben Bernanke told Congress an economic recovery depends on the government’s ability to stabilize weak financial markets. He said the efforts were needed to avoid “a prolonged episode of economic stagnation.”

Investors are still worried the government won’t succeed. On Monday, the government injected $30 billion to troubled insurer American International Group Inc., its fourth attempt to stabilize the company since September.

Bernanke’s remarks came as the central bank announced it would begin lending up to $200 billion in an initial move to spur consumer and small-business borrowing for autos, education, credit cards and other expenses. The Fed first announced the plan late last year.

That offered some support to the market and helped curb selling, traders said.

“I think people are just finally happy to see that it’s here and that it’s going to begin,” said Joe Saluzzi, co-head of equity trading at Themis Trading LLC. “Normally Wall Street will buy the rumor and sell on the news but I think this is kind of the opposite effect.”

According to preliminary calculations, the Dow fell 37.27, or 0.6 percent, to 6,726.02. The index is now down more than 52 percent from its record of 14,164.53 set in October 2007.

Broader stock indicators also fell. The S&P 500 index slid 4.49, or 0.6 percent, to 696.33.

The Nasdaq composite index fell 1.84, or 0.1 percent, to 1,321.01.

The Russell 2000 index of smaller companies fell 6.79, or 1.9 percent, to 361.01.

Two stocks fell for every one that rose on the New York Stock Exchange, where volume came to a moderate 1.9 billion shares.

Investors showed little reaction to testimony from Treasury Secretary Timothy Geithner, who told the House Ways and Means Committee the added spending in the Obama administration’s budget is necessary because the previous administration was unwilling to make long-term investments in health care, energy and education.

President Barack Obama on Tuesday likened the stock market to the daily tracking polls used during campaigns. He said tracking Wall Street’s “fits and starts” too closely could lead to bad long-term policy.