U.S. Stocks Surrender Early Gains

Updated from 9:39 a.m. EDT

Stocks in New York quickly retreated from early gains Thursday, following a report that the Treasury Department may take equity positions in U.S. banks. Tight credit markets were weighing on investor enthusiasm even as tech got a boost from IBM's (IBM) solid third-quarter earnings.

The Dow Jones Industrial Average was recently down 80 points to 9178. It was one year ago today that the Dow closed at an all-time record high of 14,164. The S&P 500 was losing 13 points to 972. The Nasdaq was better by 10 points at 151.

On Wednesday, stocks traded chaotically before closing with losses after the Federal Reserve and central banks from other countries issued a coordinated cut in interest rates to alleviate the credit crunch.

As the new session got underway, credit markets continued to tighten despite the rate cuts. Three-month Libor, a measure of the rate banks charge one another for large loans, was up 43 basis points to 4.75%. Overnight Libor was up 1.16 percentage points to 5.09%.

Commercial paper wasn't faring much better. The Fed reported that the market for company debt declined by $56.4 billion to $1.55 trillion for the week ended Oct. 8. Paper issued by financial institutions was down $42.4 billion to $641 billion, the Fed said.

Meanwhile, The New York Times reported that the Treasury may take ownership positions in U.S. banks to improve confidence in the financial system. The U.K. has pursued a similar plan by taking partial national ownership in Royal Bank of Scotland (RBS) and Barclays (BCS).