U.S. Stocks Scramble for Direction

Updated from 11:10 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, up some 164 points earlier, was lately down 31 points at 8412. The S&P 500 was down 2 points to 849, and the Nasdaq was losing 20 points to 1451.

The major averages' earlier opening rally followed 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.

"Volatility is the norm here and not the exception," said Art Hogan, chief market analyst at Jefferies, of the market's reaction to the new government programs. He said the announcement of the new TARP initiatives were already telegraphed to the market and the previous two-day rally had been in part a reaction to additional intervention. "We may have celebrated this news already," he said.