The opening rally fizzled Wednesday amid profit-taking from the prior session's rally and after a report showed U.S. crude supplies were smaller than expected last week.
Oil prices pulled back below $107 a barrel Wednesday after the Energy Department reported that crude inventories rose by 200,000 barrels last week, well below the 2.1-million increase expected. Gasoline inventories unexpectedly shrank.
Energy stocks, including Dow components Exxon Mobil and Chevron , declined.
Shares of Visa surged as high as $60 a share in their debut on the New York Stock Exchange. Shares had priced at $44, raising $17.9 billion in the largest initial public offering in U.S. history.
JP Morgan , which stands to make $1 billion from the Visa IPO, saw its shares rise more than 3 percent, making the stock the biggest gainer on the Dow.
"There are two ways we would go with [Visa] stock," David Menlow, president of IPOFinancial.com, told CNBC. "You buy it when it goes down and you buy it when it goes up, because they are the biggest and the best at what they do. They overshadow what happens with MasterCard ... Their growth and expansion plans are really staggering."
Today, there's a lot of buzz in the market that we may have already seen the bottom.
"I think we’re at the bottom of this so-called crisis. And I think we move higher from here," Fritz Meyer, senior investment officer at AIM Investments, told CNBC. "The Fed’s been fumbling around for the right key to unlock the liquidity log jam … I think they finally found it."
Harry Clark, president of Clark Capital Management Group, agrees. "I think the all-clear has been given. We look for some drastic event -- Bear Stearns was it," Clark told CNBC.
Still, investors remained wary in this volatile market. Long-term investors pumped a record amount of money into cash holdings in March, according to a Merrill Lynch survey of nearly 200 fund managers. Their appetite for risk dwindled near a record low as many felt there wasn't a compelling reason to jump off the sidelines just yet.
The Office of Federal Housing Enterprise Oversight lowered the capital requirementon government-backed mortgage lenders Fannie Mae and Freddie Mac to 20 percent from 30 percent, a move that will provide up to $200 billion in immediate liquidity for stressed mortgage markets.
Morgan Stanley reported its profit dropped by one-third but beat expectations. Net income came in at $1.45 a share, blowing past estimates of $1.03 a share.
The news from Morgan comes a day after Lehman Brothers and Goldman Sachs cheered the markets yesterday with smaller-than-expected declines in revenue.
News has emerged that both Lehman and Goldman have tapped the Federal Reserve's so-called discount windowafter the central bank took the unprecedented step over the weekend of opening the window to investment banks. Lehman borrowed $2 billion, sources said. It is unclear how much Goldman requested.
Bear Stearns shares pulled back after rallying above $6 a share this morning. Analysts are closely watching the stocks's unusual jumps after J.P. Morgan's weekend offer to buy the firm for $2 a share.
MF Global rallied for a second day, after taking a beating on Monday amid liquidity concerns. The largest futures brokerage on Tuesday announced that it is increasing margin requirements in its equities-derivatives business.
The market started off the day with its collective chin up, but shadows of the credit crunch lurked.
Just one day after the Federal Reserve cut its target for the federal-funds rate by three-quarters of a percentage point to 2.25 percent, early market movement was haunted by rumors that the subprime collapse that has strangled US banks may spread overseas.
"Keeping the interest rates low certainly had a positive effect… but also the banks have to start easing the credit and if they don't do that there's nothing (Federal Reserve Chairman Ben Bernanke) can do," Elissa Bayer, director of private clients at Insiger de Beaufort told "Worldwide Exchange."
"I think we're actually come back to 1987 when you saw these huge big swings in the market. You have not, at this point, got a rational market," Bayer said.
Discover Financial , the No. 4 U.S. credit-card network, reported its net income fell 65 percent, hurt by a charge related to its British credit unit, Goldfish.
General Mills, which makes cereal, yogurt, soup and other packaged foods, reported its net income soared 61 percent, helped by cost-cutting measures, commodities hedges and higher sales.
In the technology sector, Adobe shares advanced after the software maker beat earnings forecasts.
Priceline slipped after Susquehanna Financial lowered its rating on the stock to "neutral" from "positive." Analyst Marianne Wolk recommended that investors look at lower-valued stocks in the sector such as Google or eBay .
WEDNESDAY: Visa starts trading; Starbucks shareholder meeting; Crude inventories; New York Auto Show preview
THURSDAY: Weekly jobless claims; Philly Fed report; FedEx earnings; Bond market closes early
FRIDAY: Financial markets closed for Good Friday holiday
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