U.S. Stocks Ease Off Gains

Updated from 9:43 a.m. EST

Succumbing to the volatility that has lately plagued the market, stocks on Wall Street were dropping from earlier highs Tuesday, after the Federal Reserve announced a $600 billion program to aid government-backed mortgage firms and a $200 billion program to aid consumers hurt by the credit crisis.

The Dow Jones Industrial Average was down 23 points to 8421, and the S&P 500 was shedding 4.3 points to 848. The Nasdaq slipped 27 points to 1445.

The major averages had earlier enjoyed an opening rally, following the Fed's announcement that it would buy direct obligations and mortgage-backed securities tied to the Federal Home Loan Banks and Fannie Mae (FNM), Freddie Mac (FRE) and Ginnie Mae.

The Fed also announced the creation of a $200 billion facility for holders of triple-A rated asset-backed securities tied to loans related to education, autos, credit cards and small businesses.

Speaking at a press conference about the Fed programs and the $700 billion Troubled Asset Relief Program, Treasury Secretary Henry Paulson said that stabilization of the mortgage-backed securities market and stimulation of consumer-lending markets are crucial. He said that Americans need to continue to be able to finance everyday purchases and stressed that no single piece of legislation was likely to resolve the credit crisis.

Bill Stone, chief investment strategist for PNC Wealth Management, said that intervention into the asset-backed commercial paper markets is a continuation of efforts to unfreeze credit markets. By facilitating the securitization of asset-backed bonds, the government is encouraging additional lending, which helps consumers finance purchases, he said. When credit markets are too tight, said Stone, "Even if the deals are good, it doesn't make any difference. Not many of us can pay in cash."