Wall Street expects interest rates to be cut

NEW YORK – Stocks struggled to rebound Monday as investors grew more confident that the Federal Reserve will again cut interest rates to ward off a recession, but Wall Street also worried about a resurgence of tensions between the U.S. and Iran.\nInvestors have grown more optimistic about a rate cut at the Fed’s Jan. 29-30 meeting after last week’s disappointing reports on jobs and manufacturing. And, they might get some clues about the central bank’s stance when its chairman, Ben Bernanke, delivers a speech on Thursday.\nBut while that optimism supported stocks, the market fluctuated between gains and losses after the White House warned Iran following an incident involving that country’s forces and three U.S. Navy ships in the Strait of Hormuz on Sunday.\nWall Street was also uneasy as it awaited fourth-quarter earnings season, which unofficially starts Wednesday when aluminum producer Alcoa Inc. posts results. Analysts said they will be paying particular attention to financial services stocks that have been hit hard by the ongoing credit crisis.\n“I have the feeling the market wants to hear some good news, and that one of these days we’re going to get it and see a tremendous move higher,” said Matt Kelmon, portfolio manager of the Kelmoore Strategy Funds. “We pretty much know the Fed is going to lower rates again, but the real catalyst might come from some of these earnings reports.”\nIn midafternoon trading, the Dow Jones industrial average slipped 7.81, or 0.06 percent, to 12,792.37 after moving in and out of positive territory.\nBroader stock indicators were mixed. The Standard & Poor’s 500 index added 1.21, or 0.09 percent, to 1,412.84, and the tech-heavy Nasdaq composite index fell 5.38, or 0.21 percent, to 2,499.27.\nLast week, in just the first three trading days of 2008, the Dow lost 3.5 percent, the S&P 500 index fell 3.86 percent, and the Nasdaq dropped 5.57 percent.\nBond prices continued to rise Monday after a rally during the past week. The yield on the benchmark 10-year Treasury note, which moves opposite its price, dipped to 3.84 percent from 3.87 percent late Friday.\nThe potential of conflict with Iran, one of the world’s largest oil producers, triggered concerns that crude prices would build on last week’s record $100 a barrel. Instead, oil fell on the belief that a cooling global economy will decrease demand for energy.\nA barrel of light sweet crude tumbled $2.85 at $95.06 on the New York Mercantile Exchange.The dollar was mixed against most major currencies, while gold moved lower.\nIn corporate news, Time Warner Inc. rose 11 cents to $16.04 after the entertainment company announced it plans to release high-definition movies on Blu-ray rather than Toshiba Corp.’s HD DVD formal. Blu-ray is owned by Sony Corp.\nNapster Inc. fell 1 cent to $1.98 after the online music service announced plans to offer downloads as unprotected MP3 files. Previously, users were not able to play Napster downloads on popular music players like Apple Inc.’s iPod and Microsoft Corp.’s Zune.\nTechnology stocks could fluctuate as more news comes out of the Consumer Electronics Show, being held in Las Vegas this week.\nKrispy Kreme Doughnuts Inc. Chief Executive Daryl Brewster has resigned amid a sputtering turnaround effort. The Winston-Salem, N.C.-based company said Brewster left for personal reasons but will stay with the company until the end of January. Shares rose 31 cents, or 11 percent, to $3.14.\nThe Russell 2000 index of smaller companies advanced 5.40, or 0.75 percent, to 727.\nAdvancing issues outpaced decliners by a 3 to 2 margin on the New York Stock Exchange, where volume came to 1.03 billion shares.\nOverseas, Japan’s Nikkei stock average closed down 1.3 percent. Britain’s FTSE 100 rose 0.34 percent, Germany’s DAX index added 0.56 percent and France’s CAC-40 was up 0.41 percent.