Fed tries to ease Wall Street worries by adding $19 billion

NEW YORK (AP) – Wall Street closed out a difficult week with a mixed finish Friday after the Federal Reserve injected billions of dollars into the banking system to calm markets torn by worries about evaporating credit. The Dow Jones industrials, down more than 200 points during the session, ended with just a 31-point deficit and managed to post a gain for the week.

The stock market, which has been gyrating for weeks over fears that credit is drying up, pared its losses after the Fed’s injections of cash and following morning comments from the central bank that it would do all it can to “facilitate the orderly functioning of financial markets.” The steep declines seen at times during the session and persistent volatility, however, showed the depths of fear that had some investors yanking money out of stocks.

The Fed added $19 billion in liquidity to the market Friday morning, then another $16 billion and, finally, $3 billion.

Federal Reserve policy makers “are trying to do everything they can short of cutting the federal funds rate” to try to calm the markets, said Ed Yardeni, president of Yardeni Research in Great Neck, N.Y.

But, he said, “I think they probably have to cut rates, and probably before their scheduled September meeting.”

He noted that it was Fed rate cuts that calmed the market after the 1998 Russian debt crisis and the implosion of the hedge fund Long-Term Capital Management.

The Dow closed down 31.14, or 0.23 percent, at 13,239.54. On Thursday, the Dow fell 387 points and extended a series of triple-digit moves that began in late July.

Friday’s moves were typical of the zigzag trading in the Dow since the index closed at a record 14,000.41 on July 19. The Dow is down about 761 points, or 5.4 percent, from its record close.