Stocks finished near even Thursday as Wall Street endured another topsy-turvy session, with rumors – of more subprime trouble and a Fed rate cut – proving just as influential on the markets as a handful of economic and earnings reports.
The Dow Jones Industrial Average finished in negative territory while the tech-heavy Nasdaq also ended down, all while oil soared to a record high. A mixed bag of economic readings including a real estate report that momentarily spurred a rally also highlighted the day and played havoc with trading.
But unsubtantiated rumors dominated.
Stocks fell around mid-day on rumors that a major writedown loomed for American International Group - which CNBC later debunked. Meanwhile, traders mulled the possibility of a Fed rate decrease at its meeting next week.
Both stories came together to push stocks off their lows, with the Dow Jones Industrial Average briefly hitting positive numbers shortly after the AIG rumors were unmasked. The whisper campaign occurred a day after Merrill Lynch rocked the market with its own credit crisis.
It all added up to an eventful trading day that reflected how sensitive investors are to virtually any piece of news to hit the trading floor.
"People are looking to protect themselves and it seems the bears come out at the slightest drop of bad news," said Robert Heller of Chapdelaine Brokerage.
Meanwhile, Motorola and Sony both posted solid earnings reports but couldn't stem the losing tide among tech stocks. Microsoft turned in earnings after the closing bell that easily beat estimates, and shares surged upward in postmarket trading.
Investors held out hope that the Fed will come along next week and inject the market with another rate cut, a trend that worried some analysts.
"I think the Fed is such a major piece of this market now, more so than ever. If they don't cut in this next meeting I think the market could drop off some more in the near term," said Nadav Baum, managing director of investments for BPU Investment Management. "My only concern near term is you really don't want the Fed to come to the rescue all the time. That seems to be the kind of market we're in right now, with any news throwing it either way."
Real estate and the financial sector, which continued to suffer over subprime losses, have been causing some of the biggest moves in the markets, and the morning housing report triggered moves in both directions.
Sales of new single-family U.S. homes rose 4.8 percent in September while the inventory of homes fell and the median sales price rose, according to a government report that delivered unexpectedly benign news for the battered sector. New single-family home sales rose to an annual rate of 770,000 from a revised rate of 735,000 in August.
Home builder stocks initially welcomed the National Association of Realtors report, but the sector eventually turned mixed. Pulte Homes, the No. 3 U.S. home builder, posted a quarterly loss on charges topping $1 billion and said orders fell 37 percent.
Oil, meanwhile, hit a new record over $90 Thursday as tight inventories and fresh signs OPEC will shrug off calls for additional oil from big consumer nations sent prices up more than 3 percent.
Eli Lilly was among the biggest losers of the trading day as shares dropped when the drugmaker announced it had stopped two small trials of blood clot preventer prasugrel, the company's most important experimental drug.
On the Nasdaq, Comcast shares fell dramatically as the cable TV operator lost more basic video subscribers than analysts expected.