CSBJ Daily

The Associated Press

NEW YORK (AP) _ Stocks wavered Wednesday as investors paused a day after the market’s huge rally and digested better-than-expected results at Morgan Stanley that eased concerns about the investment banking sector.

News that the government plans to free up billions of dollars at Fannie Mae and Freddie Mac, a move that could help struggling homeowners, also quelled some of the market’s fears.

Investors sent stocks charging higher Tuesday on stronger-than-expected investment bank results and several moves from the Federal Reserve, including a 0.75 percentage point rate cut, aimed at jump-starting the credit markets. Some profit-taking was to be expected after the huge gains that saw the Dow Jones industrials shoot up 420 points.

Morgan Stanley’s earnings indicated that the bank is relatively healthy like Lehman Brothers Holdings Inc. and Goldman Sachs & Co., rather than at risk of failure like Bear Stearns Cos. J.P. Morgan Chase & Co. struck a deal Sunday to acquire Bear Stearns, which was on the verge of succumbing to credit troubles.

Meanwhile, the Office of Federal Housing Enterprise Oversight, which oversees government-backed Fannie and Freddie, said the changes should result in an immediate infusion of up to $200 billion into the market for mortgage-backed securities. This could mean greater demand for mortgages – an aid for struggling homeowners hoping to refinance at more favorable terms.