Stocks wavered in another volatile trading session Tuesday as existing-home sales fell more than expected, oil dropped $5 and Alcoa dragged on the Dow.
These wild see-saw sessions are likely to be the normthis summer, many strategists say, as the market searches for a bottom. And in this type of terrain, you have to be careful.
"If you get too involved in the short term, this market will break your neck," said Jordan Kimmel, portfolio manager at Magnet Investing Group.
With all three major indexes either in or just above bear-market territory, a bounce is on the horizon but bad news like the Fannie-Freddie worries of yesterday's session, is keeping it at bay.
"I've been doing this for over 25 years and I can't remember the gloom and doom this thick, really, ever before," said Jordan Kimmel, portfolio manager at Magnet Investing Group. "The whole mood of the market and cash on the sidelines resembles what has always been a turning point in the market," he said. "When you get to these levels of extremes, things change."
The problem, though, is finding the catalyst -- and Kimmel doesn't think oil's going to go much lower.
Some strategists say the market could continue to slide this summer-- throwing out numbers as low as 9,200 for the Dow -- and that the entry point may not come until the fall.
"You are in a period now where the market is overshooting on the downside," market strategist Byron Wien said on CNBC's "Squawk Box" this morning. The market is in the process of bottoming and will gather strength by the end of the year.
In the day's economic news: Existing-home sales dropped 4.7 percentin May, nearly the National Association of Realtors reported, following an upwardly revised 7.1-percent surge in April. Wholesale inventories rose 0.8 percent in May, though a gauge of how long it would take to work through the current inventory fell to a record low amid strong sales of apparel and petroleum.
Offering the market some support earlier were comments by Fed Chairman Ben Bernanke that the central bank may extend its emergency-lending programfor big Wall Street banks.
"We are currently monitoring developments in financial markets closely and considering several options, including extending the duration of our facilities for primary dealers beyond year-end should the current unusual and exigent circumstances continue to prevail in dealer funding markets," Bernanke said in prepared remarks to a mortgage-lending forum in Arlington, Va.
Asian and European stocks declined, rattled by the prior day's trading in the U.S., when mortgage financiers Fannie Mae and Freddie Mac fell to their lowest level in more than 14 years after a note from Lehman Brothers raised concerns that they might be forced to raise billions more in capital.
Fannie and Freddie rebounded out of the gate Tuesday as comments from the mortgage lenders' regulator helped assuage concerns but then wobbled through the rest of the day.
Fannie and Freddie are adequately capitalizedand continue to be active in the mortgage market, James Lockhart, director of the Office of Federal Housing Enterprise, which regulates the two enterprises, said in an interview with CNBC. A proposed accounting change that may affect trillions of dollars of mortgage bonds issued by Fannie and Freddie should not dictate their capital requirements, he said.
More gloom from the banking sector came as one of the biggest mortgage lenders, IndyMac, said after the bell on Monday it will eliminate 3,800 jobs and stop making most home loans after regulators concluded it was no longer "well capitalized."
Merrill Lynch tumbled after a Wachovia analyst said the investment bank would likely record $5 billion in writedowns for the second quarter and post a loss for the quarter and full year.
Oil again retreated, falling about $5 a barrel to between $136 and $137 a barrel as fears decreased that a hurricane in the Atlantic Ocean would cause significant damage in the Gulf of Mexico production areas, and as the price fell for refined products. Oil dropped nearly $4 Monday.s