NEW YORK (AP) — Wall Street seesawed Friday as investors tussled with concerns about the ongoing turmoil in the banking industry and its impact on the economy but also placed bets on a range of consumer and industrial stocks. The major indexes were up in late trading after changing direction several times.

Although many financial stocks were down in response to rising losses at Citigroup Inc. and Bank of America Corp., investors were drawn by the prices of other stocks seen as less risky and that are now at bargain prices after two weeks of selling. The market was also heartened by plans by Citigroup and Bank of America aimed at restoring them to profitability; Citi is splitting in two and BofA is getting more help from the government.

“It’s that tug of war between problems and promise,” said Alan Gayle, senior investment strategist at RidgeWorth Investments. “I think there is a bit of a sigh of relief that there is assistance coming for Citi and Bank of America, but it seems like there is an ongoing need for this assistance.”

The companies’ fourth-quarter losses — Citi said it lost $8.29 billion, while Bank of America lost $2.39 billion — were sobering reminders that the sagging economy is aggravating the problems that began with the mortgage crisis in 2007.

The market drew some reassurance from the fact that Bank of America reached a deal late Thursday to receive an additional $20 billion in capital from the government. The bank will also receive guarantees to cover up to $118 billion in losses on loans and securities backed by residential and commercial real estate as it incorporates recently acquired Merrill Lynch & Co. into its operations. Bank of America’s deal with the government is similar to one Citigroup reached with the government last fall.

Meanwhile, Citigroup, among the hardest hit by the ongoing credit and mortgage market turmoil, said it plans to separate its traditional banking business from its riskier operations. Earlier in the week, Citi agreed to sell a majority stake in its brokerage business to Morgan Stanley as it looks to streamline and shed assets.

The government also said Friday afternoon it will provide $1.5 billion in loans to the financing arm of Chrysler LLC on top of the package of loans the automaker has already received to help buy it time to reorganize.

Amid the uncertainty about financials, investors were buying consumer stocks like Wal-Mart Stores Inc., McDonald’s Corp. and Procter & Gamble Co. Some tech stocks were among the gainers, including Intel Inc. and Microsoft Corp.

In afternoon trading, the Dow Jones industrial average rose 98.84, or 1.20 percent, to 8,311.33. The Standard & Poor’s 500 index rose 8.84, or 1.05 percent, to 852.58, while the Nasdaq composite index rose 16.68, or 1.10 percent, to 1,528.52.

The indexes headed for their second straight losing week, the result of selling in response to weak economic data and fears that fourth-quarter earnings reports, which begin next week in earnest, will point to a prolonged recession.

“We continue to see a tug of war between what has been some really bad economic data in recent weeks and optimism that the economy and financial markets are likely to stabilize and improve as we head through 2009,” said Michael Sheldon, chief market strategist at RDM Financial. “There clearly are a lot of crosscurrents in the market.”

Alexander Paris, economist and market analyst for Chicago-based Barrington Research, said the price swings seen in the past couple of days are likely to continue until all the earnings data is in.

“We’re going into a test of the market, given the bad numbers coming out,” Paris said. “It’s a battle between sentiment and ugly fundamentals.”

John Merrill, chief investment officer of Tanglewood Wealth Management, said the market will be eyeing results outside the financial industry to see if banking troubles are seeping further into the broader economy. If non-financials can show some growth, it could restart the late 2008 rally that stalled in the first week of January.

“There’s no sustained buying,” Merrill said. “The follow through just isn’t there.”

Bank of America shares tumbled $1.13, or 13.6 percent, to $7.19. Shares of Citi fell 11 cents, or 2.9 percent, to $3.72.

Steven Goldman, chief market strategist, Weeden & Co., said Bank of America was down in part over concerns that government financial support will diminish shareholders’ stake in the company.

“Bank of America equity holders have a new partner and are being diluted,” Goldman said, adding that the bank cut the quarterly dividend to 1 cent per share, making it less attractive, and will have to cede some managerial rights to the government.

Wal-Mart rose 27 cents to $51.62, McDonald rose $1.65 to $59.63 and Procter & Gamble rose 26 cents to $57.72. Intel rose 45 cents $13.74 and Microsoft gained 43 cents to $19.67.

The market had little reaction to the government’s latest reports showing the economy remains weak.

The Labor Department said the consumer price index fell 0.7 percent in December as energy prices slid. Economists polled by Thomson Reuters forecast a 0.9 percent drop. For the full year, prices rose just 0.1 percent — the smallest gain since prices actually fell in 1954.

Meanwhile, the Federal Reserve said industrial production from the nation’s factories, mines and utilities fell a larger-than-expected 2 percent in December. Economists expected a 1 percent.

Advancing issues outnumbered advancers by about 2 to 1 on the New York Stock Exchange, where volume came to 1.19 billion shares.

The Russell 2000 index of smaller companies rose 3.55, or 0.77 percent, to 466.17.

Oil prices rose $1.11 to settle at $36.20 a barrel on the New York Mercantile Exchange. The dollar mostly fell against other major currencies, while gold prices rose.

Bond prices fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.34 percent from 2.20 percent late Thursday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.13 percent from 0.10 percent late Thursday.

Overseas, Japan’s Nikkei stock average rose 2.6 percent. Britain’s FTSE 100 gained 0.9 percent, Germany’s DAX index rose 0.7 percent, and France’s CAC-40 was rose 0.7 percent.

New York Stock Exchange: http://www.nyse.com

source: yahoo finance

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