Stocks fluctuate after Dow's 2% drop Friday

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NEW YORK -- Stocks fluctuated Monday, with investors still wrestling with credit concerns and taking a cautious stance ahead of Tuesday's Federal Reserve meeting.

Wall Street is looking for any signs of where the economy and the markets are headed after the fractious trading of the past two weeks. In a day devoid of economic news and with few earnings reports, investors seemed to be making few big bets, especially with the Fed's meeting on interest rates coming Tuesday. Policy makers are widely expected to hold the benchmark rate steady at 5.25%; as usual, the greater concern is with the Fed's economic assessment statement. This time, investors will be looking to see what the Fed says about credit.

"I can understand why people are nervous," said Aaron Gurwitz, co-head of portfolio strategy at Lehman Brothers Investment Management. "When credit problems come to the fore, sometimes things blow over and everything gets back to normal pretty quickly and sometimes there's something out there that needs to be dealt with."

In late morning trading, the Dow Jones industrial average rose 26.91, or 0.20%, to 13,208.82. The Dow has zigzagged during the session -- falling as much as 17 points and rising as much as 84 points.

Broader stock indicators fell. The Standard & Poor's 500 index fell 2.35, or 0.16%, to 1,430.71. The Nasdaq composite index fell 18.32, or 0.73%, to 2,492.93.

Stocks have endured a volatile couple of weeks as troubles in the global credit markets -- rooted in the rise of subprime loan defaults in the U.S. -- have unfolded.

Gurwitz said that while he would be very surprised if the Fed were to adjust short-term interest rates, the central bank could indicate it stands ready to provide liquidity should credit markets seize up. Gurwitz noted, however, that the repricing of credit that's occurring in the markets isn't something the Fed would likely want to stand in the way of.

"I think it's a short-term problem," he said. "I think that the uncertainty in the credit markets, the worries about a liquidity crisis that has to be dealt with, is a risk to the financial markets -- but I think it's a long way from being a risk to the macro economy or the ability of most companies to make money."

The yield on the 10-year note rose to 4.69% from 4.68% late Friday. Bond prices move opposite their yields.

In corporate news, Bear Stearns Cos. co-President and co-Chief Operating Officer Warren Spector resigned after the collapse of two hedge funds that invested in risky mortgage-backed securities. Spector was directly in charge of the investment bank's asset management business. Bear Stearns fell $7.84, or 7.2%, to $100.51.

UnitedHealth Group Inc., the nation's second-largest health insurer, rose 98 cents, or 2%, to $48.48 after raising its earnings forecast for 2007 following adjustments related to its Medicare business.

Cooper Tire & Rubber Co. on Monday said it swung to a second-quarter profit after sales jumped 17%, driven by higher prices in North America and strong growth in Europe and Asia. The tire maker's results beat Wall Street's expectations. Cooper advanced $1.62, or 7.7%, to $22.80.

Late Sunday, Japan's Fast Retailing Co. raised its bid by $50 million to $950 million to acquire tony clothing merchant Barneys New York. Barneys, owned by Jones Apparel Group Inc., has been the subject of a bidding war between Fast Retailing and Istithmar, a Dubai-based investment firm. Jones Apparel fell 37 cents to $20.14.

Light, sweet crude futures fell $2.16 to $73.31 on the New York Mercantile Exchange. Gold prices fell, while the dollar moved in a mixed range against other major currencies.

Declining issues outnumbered advancers by about 3 to 1 on the New York Stock Exchange, where volume came to 739.3 million shares.

The Russell 2000 index of smaller companies fell 9.80, or 1.30%, to 744.62.

In trading abroad, London's FTSE 100 fell 0.58%, Germany's DAX index rose 0.11% and France's CAC-40 fell 1.06%.

Overnight, the often volatile Shanghai Composite Index rose 1.5% to a record 4628.11. Japan's Nikkei stock average dropped 0.39% at the close.
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