Stocks mixed in volatile session

Major stock indexes finished mixed Wednesday after a volatile session in which investors wrestled with a troubling outlook for bond insurers, a Wall Street giant’s $9.4-billion write-down and concern that the economy was headed for recession.

Retailing stocks slumped after a research firm said last week’s holiday sales were down from last year.

With just seven trading days left in 2007 and little data to convince Wall Street that the economy was on the upswing, investors hesitated to make any big bets on stocks.

The market reversed direction several times during the session. Share prices rose in early trading but gave back gains after Standard & Poor’s downgraded a bond insurer and lowered its outlook for four others, suggesting that the ratings on the bonds the companies insure may be headed lower.

The Dow Jones industrial average fell 25.20 points, or 0.2%, to 13,207.27.

The Standard & Poor’s 500 index fell 1.98 points, or 0.1%, to 1,453, but the Nasdaq composite index added 4.98 points, or 0.2%, to 2,601.01.

The Russell 2,000 index of smaller-company stocks rose 2.07 points, or 0.3%, to 756.13.

Declining issues outnumbered advancers by about 9 to 7 on the New York Stock Exchange.

Treasury bond yields fell as S&P;’s outlook for bond insurers sent investors toward the relative safety of government securities. The yield on the 10-year Treasury note fell to 4.03% from 4.12% late Tuesday.

The dollar rose against most other major currencies, while gold prices fell.

Light, sweet crude oil futures gained $1.16 to settle at $91.24 a barrel on the New York Mercantile Exchange after the Energy Department said U.S. inventories of crude and heating oil dropped last week while gasoline stockpiles rose.

Despite its huge write-down, Morgan Stanley rose $2.01, or 4.2%, to $50.08 after announcing that it was getting a $5-billion investment from a state-owned Chinese investment fund.

Other brokerage stocks also gained. Goldman Sachs Group gained $2.65 to $204.16. Lehman Bros. Holdings added 99 cents to $61.89.

MBIA Insurance, the largest bond insurer, closed down 68 cents, or 2.5%, to $27.02 after S&P; issued a negative outlook because of “worsening expectations” for securities backed by sub-prime mortgages. The stock had been down as much as 11% on the news.

Ambac Financial Corp., the second-biggest bond insurer, dropped as much as 8.8% after S&P; changed its outlook to negative. The stock rebounded to end up 48 cents at $27.46.

The S&P; 500 retailing index fell 1.1% after ShopperTrak RCT said retail sales fell 0.4% last week from a year earlier.

Target fell $1.44, or 2.7%, to $51.57. Macy’s slumped $1.06 to $26.70.

In other market highlights:

* Union Pacific slid $4.82, or 3.7%, to $124.61 after the railroad company said its fourth-quarter earnings would be lower than expected because of higher energy costs.

* General Mills fell $1.08 to $57.99. The cereal and packaged food company’s profit edged higher in the latest quarter but was held down by soaring ingredient costs and other expenses.

* Palm sank 41 cents, or 6.9%, to $5.52. The maker of the Treo and Centro smart phones said late Tuesday that it swung to a loss in its most recent quarter.

* Home builder Hovnanian Enterprises, which also posted a quarterly loss late Tuesday, fell 96 cents, or 11%, to $7.44.

* SLM plunged $5.98 to $22.89 after the student lender, also known as Sallie Mae, warned it might have to cut its dividend next year to help its finances.

* Darden Restaurants sank $7.74 to $28.60. After posting lower-than-expected earnings Tuesday, the operator of chains including the Olive Garden said profit would be down in 2008.

* Take-Two Interactive Software jumped 72 cents to $18.75. The publisher of the “Grand Theft Auto” video game franchise issued a better-than-expected forecast for 2008 profit.

* Overseas, key stock indexes fell 1.2% in Japan, 0.2% in Germany and 0.2% in France. Shares rose 1.1% in Hong Kong and 0.1% in Britain.