Stocks Fluctuate As Wall Street Tries to Assess Federal Reserve's Next Move

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Wall Street wavered in early trading Monday, fluctuating between gains and losses as investors
tried to assess whether the Federal Reserve will keep lowering interest rates.

Trading was expected to be uncertain after the market's big rally Friday in response to the Fed's lowering of its discount rate, the interest it charges on its loans to banks. The Fed said it would stand ready to make further moves to keep credit market losses from hurting the economy, but because it stopped short of a cut in the more important federal funds rate, uncertainty
remained on Wall Street about the policymakers' intentions. The Fed is not scheduled to meet
formally until Sept. 18, and investors are expected to remain jittery until then.

Analysts also questioned how much conviction buyers had, as much of the previous session's
rally was pinned on big institutional investors like hedge funds buying shares to cover their
positions. Some investors had been shorting the market -- betting stocks would move lower --
and were caught off guard when the central bank cut the discount rate.

Right after the market opened, the Fed  announced it injected another $3.5 billion into the banking system. The central bank has infused the market with nearly $120 billion of liquidity
since last week.