Wild swings continue on Wall Street

NEW YORK (CNNMoney.com) -- Wall Street suffered a case of deja vu Tuesday as stocks turned lower after an early rally for the second straight day, amidst continuing concerns about the subprime mortgage sector.

The Dow Jones industrial (up 1.05 to 13,353.10, Charts) average straddled the breakeven point, after climbing by as much as 100 points, with half an hour remaining in the session. The tech-laden Nasdaq (down 5.19 to 2,571.89, Charts) fell 0.1 percent while the broader S&P 500 (down 3.53 to 1,494.21, Charts) eased about 0.2 percent.

Stocks climbed earlier in the session, helped by declining oil prices, which fell over 1 percent. U.S. light crude for August lost $1.38 to $67.80 a barrel on the New York Mercantile Exchange.

But worries about the larger impact of losses by Bear Stearns hedge funds invested in securities backed by subprime mortgages, which erased the Dow's 100-plus point gain Monday, again weighed on markets.

"Again nobody can quantify what is happening with the Bear Stearns meltdown," said Matthew Smith, president and CEO at Smith Affiliated Capital. "Nobody knows [when] the next shoe is going to drop."

Smith said he expected the wild swings that markets have experienced to persist into next week with many trading desks short staffed for the Fourth of July holiday and fewer people to control volatility.

Market observers have speculated that the two funds are on the verge of collapse and similar problems could erupt elsewhere. There has also been speculation the situation could lead to a tightening of credit and ultimately disrupt the bond market.

Barney Frank, chairman of the House Financial Services Committee, said Tuesday that the subprime problems that prompted Bear Stearns to rescue one of its hedge funds would not lead to larger problems in the financial markets, Reuters reported.

Investors appeared to be unfazed earlier by a pair of earlier economic reports that missed forecasts including a new sales reading for May which fell 1.6 percent to 915,000 in May. The Conference Board also reported that its consumer confidence index fell short of estimates, sinking to its lowest level in 10 months.

On the earnings front, Lennar (down $1.22 to $37.53, Charts, Fortune 500), the nation's largest home builder by revenue, reported an unexpected loss before the market open and warned of continued losses in the third quarter. Lennar shares fell over 3 percent on the New York Stock Exchange.

Tech bellwether Oracle Corp. (down $0.43 to $19.05, Charts, Fortune 500) is due to report results after the close Tuesday, delivers positive earnings news. Analysts are forecasting improved results.

In corporate news, Rupert Murdoch's News Corp. (down $0.19 to $23.31, Charts, Fortune 500) and Dow Jones (up $1.51 to $59.01, Charts) have reached an agreement in principle over the editorial independence of the Wall Street Journal, the paper reported.

Such an agreement would pave the way for News Corp. to buy Dow Jones. News Corp. has made a $5 billion bid for Dow Jones. Dow Jones shares jumped over 2 percent Tuesday on the New York Stock Exchange.

Shares of Blackstone Group (down $1.78 to $30.66, Charts) continued to fall Tuesday, after slipping nearly 8 percent Monday, as its stock dipped below its initial public offering price of $31 a share at one point. Blackstone shares fell 4.5 percent in midday trading.

Swiss drugmaker Roche (up $0.40 to $85.70, Charts) made a hostile $3 billion bid late Tuesday for Ventana Medical Systems (up $24.58 to $76.32, Charts), which makes systems used to diagnose and treat cancer and infectious diseases. Ventana shares soared 47 percent on the news.

Shares of Huntsman Corp. (up $5.34 to $24.24, Charts, Fortune 500) soared over 28 percent Tuesday after the Dutch chemical company Basell said it has agreed to buy the chemical and pigment supplier for about $5.6 billion.

Treasury prices fell slightly, raising the yield on the benchmark 10-year note to 5.10 percent, up from 5.08 percent from late Monday. Bond prices and yields move in opposite directions.

COMEX gold for August fell $9.40 to $645.30 an ounce.

Market breadth was negative. On the New York Stock Exchange, losers beat winners 5 to 3 on volume of 1.41 billion shares. On the Nasdaq, decliners topped advancers 8 to 7 on volume of 1.72 billion shares.