Stocks Continue to Waver at the Flat Line

Updated from 2:13 p.m. EDT

U.S. stocks were mixed in an erratic session Tuesday as traders were dealing with a hawkish speech from the Federal Reserve chief, a leaping dollar and an encouraging development in the blistering oil market.

The Dow Jones Industrial Average got a substantial bump this afternoon, then stumbled back to the flat line before floating 35 points higher at 12,315. The index enjoyed particularly strong support from financial components Citigroup (C Quote - Cramer on C - Stock Picks), JPMorgan Chase (JPM Quote - Cramer on JPM - Stock Picks) and AIG (AIG Quote - Cramer on AIG - Stock Picks).

Broader indices, meanwhile, returned to negative territory following a bit of short-lived strength earlier, though both were off their lows for the day. The S&P 500 was down 2 points to 1362, and the Nasdaq Composite lost 9 points to 2450.

"The market is undergoing a state of real nervousness here," said Peter Cardillo, chief market economist with Avalon Partners. "The fact that [Fed chairman] Ben Bernanke and other Fed members are continually talking about the risks of higher inflation and hinting that the Fed is going to have to raise interest rates to combat inflation, I think, is really weighing heavily on stocks."

As the new day began, traders were digesting with a speech from leader of the central bank, who said the jump in oil costs "has added to the upside risks for inflation and inflation expectations," even as his expectations for a "substantial downturn" have simultaneously diminished. He added that the Fed "will strongly resist an erosion of longer-term inflation expectations, as an unanchoring of those expectations would be destabilizing for growth as well as for inflation."

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