Dow Fails To Hold Above 13,000

Wednesday, August 15th 2007, 10:00 am

By: News On 6

NEW YORK (AP) _ Wall Street tumbled again Wednesday after the Federal Reserve added more cash to the banking system but failed to quash investors' jitters about problems in lending.

The market traded nervously, jerking the Dow Jones industrial average above and below the 13,000 mark throughout the day, as investors wrestled with reports about potential losses at Countrywide Financial Corp. and KKR Financial Holdings LLC. By late trading, the Dow was down more than 120 points.

Central banks worldwide have supplied billions of funds to banks over the past week to make cash available for lending and keep interest rates stable amid signs that credit was drying up. On Wednesday, the Fed said it would accept a ``repo'' of $7 billion, in which it buys that amount in securities from dealers, who then deposit the money into commercial banks.

Still, the Fed has not indicated that it will free up more cash by making an interest rate cut at its Sept. 18 meeting, a move that many on Wall Street believe could stoke a stock recovery. Inflation has been keeping the central bank from lowering rates; the Labor Department said Wednesday its Consumer Price Index rose a mild 0.1 percent in July, as expected, but energy prices remain high.

``Yes, the market would probably move dramatically higher if they made a cut,'' said Linda Duessel, market strategist at Federated Investors in Pittsburgh. ``But I think it's more prudent to allow this correction to continue to unfold. After all, we're in the month of August and coming into September _ historically, the weakest months of the year. The market has been in need of a correction.''

In late afternoon trading, the Dow fell 114.94, or 0.88 percent, to 12,913.98, falling below 13,000 for the first time since April 25. The Dow fell more than 200 points Tuesday, resuming a weeks-long series of triple-digit moves. The blue-chip index is about 1,100 points below its record close above 14,000 reached in mid-July.

Broader stock indicators also fell. The Standard & Poor's 500 index dropped 12.04, or 0.84 percent, to 1,414.50, and the Nasdaq composite index lost 26.39, or 1.37 percent, to 2,472.73.

Bonds rose, moving in the opposite direction as stocks. The yield on the benchmark 10-year Treasury note fell to 4.71 percent from 4.73 percent late Tuesday.