NEW YORK – Wall Street tumbled into a moderate gain after fluctuating up and down mirroring the oil prices and uncertainties regarding the financial sector of the economy.
The mortgaging crisis continues to cause panic among investors. Fannie Mae and Freddie Mac shares lost 27 and 22 percent respectively. It is this sector that is particularly befuddling the markets who are nervous that the government-chartered companies will need to be bailed out from Treasury Department which could in turn result in shareholder equity being erased.
However, the market had made some adjustments in the financial stocks which had been decreasing considerably by covering many of their short positions. There are also convincing reports that the concerns about the financial crisis related to the mortgage industry is overblown.
Referring to the federal government in a public radio interview Wednesday, Fannie Mae Chief Executive Daniel Mudd said that he didn’t find the need to ask anything from the government nor had they offered anything new.
“I don’t anticipate that they will do that.”
On the other side, despite losing 35$ since the July 11 high, oil prices ended up higher which in turn raised the stock prices of the energy companies. The Dow Jones Industrial average rose 68.88 to 11,417.43 after the oscillations in the index. However, as consumers suffer from higher oil prices which translate into inflation, the long term prospects for growth remain bleak as the federal reserve would like to maintain a tight monetary policy.
The possibility that the mortgage crisis may not be so critical and a jump in oil prices gave confidence to the market.
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