Stocks Return to Neutral

Updated from 11:00 a.m. EDT

Stocks on Wall Street descended from their impressive early gains Tuesday to trade in and out of the red after the Treasury Department outlined a plan to invest some $250 billion in U.S. banks, with about $125 billion reportedly earmarked for the nine largest.

The Dow Jones Industrial Average, up more than 400 points earlier, was lately up just 34 points at 9421, and the S&P 500 was up 4 points to 1007. The Nasdaq was giving back 29 points to 1815.

On Monday, stocks snapped back from their eight-session October losing streak with massive gains. The Dow registered its largest-ever one-day point gain, rising 936 points, or 11%. The S&P 500 and the Nasdaq each jumped nearly 12%. The large gains came as central banks around the world collaborated on plans to inject capital into the global financial system.

Ahead of the new session, Treasury Secretary Henry Paulson said his agency would dedicate $250 billion of the $700 billion bailout package to buying equity positions in U.S. banks.

The government would buy preferred shares in Goldman Sachs ( GS), Morgan Stanley ( MS), JPMorgan Chase ( JPM) , Bank of America ( BAC), Merrill Lynch ( MER) , Citigroup ( C), Wells Fargo ( WFC), Bank of New York Mellon ( BK) and State Street ( STT), The Wall Street Journal reported.

Speaking in Washington Tuesday morning, Paulson said he dislikes government ownership in U.S. financial firms but the equity investment will help unfreeze liquidity markets and alleviate the crisis. Federal Reserve Chairman Ben Bernanke praised Paulson's plan, and FDIC Chair Sheila Bair said that additional insurance of deposits in banks would also boost confidence in the financial system.

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