Chaos Ends With Bulls Ahead

Several other financials were similarly weak. Countrywide Financial (CFC Quote - Cramer on CFC - Stock Picks), which has dropped nearly 20% over the past two weeks, was lower by another 3.4%. Lehman Brothers (LEH Quote - Cramer on LEH - Stock Picks) shed 1.9%, and Merrill Lynch (MER Quote - Cramer on MER - Stock Picks) slid 1.1%.

For the time being, the market doesn't know whether to focus on debt problems or on strong profit reports and government and industry data, according to Art Hogan, chief market analyst with Jefferies.

"There's a real dichotomy that's creating this tug-of-war, shifting the market between positive and negative ground," he said. "On one end of the spectrum, we have a fear of the credit markets and how deep the subprime problem is. On the other end, the market rallies when it focuses on earnings and economic data. It depends on whether investors are fearful or greedy."

Energy prices were also in focus, as the Energy Department posted its weekly inventory report. The data showed an unexpected draw of 6.5 million barrels from crude inventories last week. Distillate stocks rose 2.8 million barrels, and gasoline inventories increased by 600,000 barrels last week.

The front-month September crude contract set a record intraday high of $78.77 a barrel before pulling back. Oil dropped $1.68 to end at $76.53 a barrel.

Treasury prices eased following the release of the Institute for Supply Management's manufacturing index. The index rose to a reading of 53.8 last month from 56.0 in June, slightly below expectations. Anything above 50 is considered growth. On Friday, the ISM will post its services index for July.

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