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NEW YORK - US shares slashed losses Friday after an injection of 38 billion dollars into the banking sector by the Federal Reserve aimed at easing investor fears of a credit crunch.
The Dow Jones Industrial Average closed 31.14 points (0.23 percent) lower at 13,239.54 in final figures and the tech-rich Nasdaq composite fell 11.60 points (0.45 percent) to 2,544.89.
The broad-market Standard & Poor's 500 index closed essentially flat, up 0.55 point (0.04 percent) at 1,453.64.
All three major indexes had opened sharply lower, and the Dow plunged more than 200 points in the morning, as Wall Street extended the prior day's bloodletting. The Dow lost 2.83 percent Thursday, its steepest decline since February.
Fears about the distressed US mortgage sector and tightening credit have spooked investors around the world, sending Asian and European markets into negative territory for the second day in a row in a massive flight from risk.
At the close in Europe, the FTSE 100 in London was down 3.71 percent, in Paris the CAC 40 fell 3.13 percent and in Frankfurt the Dax lost 1.48 percent.
Central banks acted for the second straight day to inject liquidity into financial markets to offset tightening credit and calm jittery markets.
The Federal Reserve pumped 38 billion dollars into the US banking system in a bid to calm widespread market turmoil. The Fed made three injections: 19 billion dollars and another 16 billion in the morning, and three billion dollars in the afternoon.
On Thursday the central bank injected 24 billion dollars.
"The Federal Reserve is providing liquidity to facilitate the orderly functioning of financial markets," the US central bank said in a rare statement accompanying the morning injections.
Dick Green, an analyst at Briefing.com, said: "This is an important symbolic move that helps provide temporary liquidity to the financial markets, but won't solve the root problem or end the fears about ongoing problems in the credit markets."
The European Central Bank, meanwhile, pumped more money into the eurozone banking sector, taking its cash injections to 155.85 billion euros (212.98 billion dollars) in two days.
Central banks in Japan, Australia and Canada also injected money into their systems Friday.
"Central banks are doing the right thing: they're adding liquidities to a system that needs it and they will continue to do so until it doesn't need it," said Art Hogan, an analyst at Jefferies.
"That's happening on the face of a pretty strong global economy so I think at the end of the tunnel there is some light."
The International Monetary Fund judged the global financial market turmoil "manageable," stressing "the fundamentals supporting strong global growth remain in place."
The market was volatile, similar to most recent sessions. The Nasdaq Stock Market said it had its biggest day Thursday, trading a record 3.31 billion shares.
Investors, who were taken aback Thursday by French bank BNP Paribas's announcement it had suspended three funds exposed to the distressed US sub-prime market, heard another warning, from Countrywide Financial.
The leading US mortgage lender said that market conditions could affect its bottom line, sending its share down 2.79 percent to 27.86 dollars, after it plunged more than 10 percent in opening trade.
Elsewhere in the financial sector, US bank Washington Mutual fell 2.20 percent to 35.95 dollars after warning that the sub-prime mortgage sector crisis is threatening its operations.
Investment bank Bear Stearns dropped 3.38 percent to 110.20 and Lehman Brothers lost 1.80 percent at 59.07.
On the upside, Merrill Lynch rose 0.75 percent to 74.12 and Goldman Sachs added 0.96 percent at 180.50.
The Wall Street Journal reported online, citing people familiar with the inquiry, that the Securities and Exchange Commission is checking the books at top Wall Street brokerage firms and banks to make sure they are not hiding losses in the sub-prime-mortgage meltdown.
Among other stocks in focus was Boeing, which reversed losses to add 0.14 percent at 98.44 dollars. The company denied a report by The Seattle Post-Intelligencer that it was delaying the first flight of its 787 Dreamliner to October from late September.
Bond prices rose as investors sought safe havens.
The yield on the 10-year Treasury fell to 4.776 percent from 4.490 percent late Thursday and the yield on the 30-year Treasury dropped to 5.005 percent from 5.029 percent. Bond prices and yields move in opposite directions.
- AFP /ls
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