Wall Street finished mixed in another seesaw session Wednesday after regulators allowed Fannie Mae and Freddie Mac to buy more mortgages and Federal Reserve Chairman Ben Bernanke said the central bank will remain vigilant about the weakened economy.
Investors pared the market's gains after both developments had initially boosted confidence amid increasing signs of a slowing economy. Wall Street has in recent months grappled with concerns about rising prices, a weaker dollar and continued turmoil in the credit markets.
Bernanke indicated the Fed is more concerned about the sagging economy then the immediate risks of inflation. In testimony on Capitol Hill, he told lawmakers the Fed will "act in a timely manner as needed to support growth and to provide adequate insurance against downside risks."
The remarks came as the dollar plunged to a record low against the 15-nation euro. That sent already inflated oil and gold prices further into record high territory, and raised the prospect of accelerating inflation.
Meanwhile, Fannie Mae and Freddie Mac _ the biggest sources of financing for U.S. home loans _ helped give the market some ballast after the government removed restrictions on the size of their portfolios. That offered a chance for an easing of the extremely tight mortgage market that has been battered by the subprime loan crisis.
"The government is trying to do their part," said Todd Leone, managing director of equity trading at Cowen & Co. "Together, this helps put a little more faith in the economy."
Major indexes initially moved higher before investors cash in profits, following a pattern set in recent weeks. The Dow Jones industrial average _ now up four straight sessions _ rose 9.36, or 0.07 percent, to 12,694.28.
Broader indexes were narrowly mixed. The Standard & Poor's 500 index fell 1.27, or 0.09 percent, to 1,380.02, and the Nasdaq composite index rose 8.79, or 0.37 percent, to 2,353.78.
Stocks were somewhat under pressure after the euro climbed to a record high of $1.5057 as sentiment increased that the Fed would continue its rate cut campaign. The U.S. currency was mixed against other major currencies.
The dollar's continued slide drove more money into commodities _ especially into oil and gold.
Oil prices broke through a new intraday high of $102 a barrel in overnight trading, then fell $1.24 to settle at $99.64 a barrel on the New York Mercantile Exchange. Meanwhile, gold futures set a new high of $961.30 an ounce.
Bond prices rose slightly. The yield on the benchmark 10-year note, which moves opposite its price, fell to 3.85 percent from 3.86 percent late Tuesday.
The moves followed a government report showing business investment in durable goods weakened more than forecast at the start of the year, playing into the nervousness about economic slowing. The Commerce Department reported durable goods orders dropped 5.3 percent in January, exceeding forecasts.
There was more bad news about the housing slump. The Commerce Department reported that new home sales fell in January for a third straight month, pushing activity down to the slowest pace in nearly 13 years.
Investors have been monitoring economic data to get a better idea about inflation, which could cause the Fed to stop lowering rates. The Fed, widely expected to make a half-point cut in interest rates, will meet again March 18.
Harry Clark, president of Clark Capital Management in Philadelphia, said a slowdown in the economy that avoids recession could create a moderate drop in demand and help ease pressure from rising prices.
"If the economy goes down the drain with rising prices, that's stagflation," he said. "Rising prices aren't a big deal if everyone is employed and the economy is growing."
The notion of some easing in the weakened mortgage sector pleased investors. Fannie Mae shares rose 30 cents to $27.27, while Freddie Mac shares fell 12 cents to $25.09.
The Russell 2000 index of smaller companies fell 0.88, or 0.12 percent, to 716.44.
Declining issues outpaced advancers by a 5 to 4 margin on the New York Stock Exchange, where volume came to 1.46 billion shares.