Stocks Surrender Gains, Lose Ground

Updated from 12:15 p.m. EST

Succumbing to the volatility that has lately plagued the market, stocks on Wall Street were losing ground Tuesday, even as the Federal Reserve announced $800 billion in new federal programs to fix frozen credit markets.

The Dow Jones Industrial Average, up some 164 points earlier, was lately down 133 points at 8310. The S&P 500 was down 12 points to 839, and the Nasdaq was losing 36 points to 1436.

The major averages' earlier opening rally followed the Fed's announcement that it would use $600 billion to buy direct obligations and mortgage-backed securities tied to the Federal Home Loan Banks and Fannie Mae (FNM Quote), Freddie Mac (FRE Quote) 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.

An early rally on the news of government assistance quickly gave rise to profit-taking, however, as investors remained skittish about the financial crisis' continued impact on the economy.

"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. Hogan 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.