U.S. Stocks End Volatile Day With Mixed Results

Updated from 4:14 p.m. EST

After a Tuesday marked with choppy trading, blue-chip stocks eked out a third straight day of gains, after the Federal Reserve announced $800 billion in new federal programs to help fix frozen credit markets. Technology stocks, on the other hand, lost ground following weak earnings results from sector giant Hewlett-Packard (HPQ Quote).

The Dow Jones Industrial Average, at one point up some 164 points and at another down 161 points, ended the session with a gain of 36.47 points, or 0.4%, at 8479.86. The S&P 500 added 5.6 points, or 0.7%, to 857.41, but the Nasdaq dropped 7.29 points, or 0.5%, to 1464.73.

An opening rally by the major averages 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 said it would dedicate $100 billion to the outstanding debt of the government-sponsored entities and another $500 billion to purchases of their mortgage-backed securities.

To put such a move in perspective, $500 billion is a year's worth of new issuance of mortgage-backed securities, said David Ader, bond strategist at RBS Greenwich Captial. "It's had a very very dramatic and impressive effect," he said.

Brian Bethune, director of financial economics at Global Insight Economics, said that the Fed is trying to reduce spreads on the value of Fannie and Freddie securities relative to Treasuries. Bethune said that reducing those spreads, which are at unusually high levels, would in turn translate to lower mortgage rates.