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Stocks fluctuate after Fed keeps rates unchanged
Wall Street NYRD103 5658153
Trader Christopher Morie, center, uses his handheld device as he works on the floor of the New York stock Exchange, Tuesday Sept. 16, 2008. Stocks extended their decline and bond prices jumped Tuesday, a day after Wall Street's worst session in years, as nervous investors grappled with concerns about insurer American International Group Inc. and awaited the Federal Reserve's decision on interest rates. - photo by Associated Press

    NEW YORK — Wall Street fluctuated in a wide range Tuesday after the Federal Reserve disappointed some investors by keeping interest rates unchanged, but also sent a signal to the markets that the economy is not in dire straits.
    In a statement accompanying its decision, the Fed noted the growing strains in the financial markets a day after the Dow Jones industrials plunged 504 points in reaction to continuing turmoil in the financial sector. The Fed also noted the ongoing weakening of the labor market. But it also sought to give some reassurance by saying it expected its policy moves to foster moderate economic growth over time.
    The Fed has cut its target federal funds rate by 3.25 percentage points to its current level of 2 percent over the past year. Many on Wall Street expected the Fed to keep its rates steady but there was some hope that the central bank would try to calm uneasy financial markets with a rate cut.
    Still, the fact that the Fed didn’t lower rates was a sign that it doesn’t believe the economy needs that type of stimulus. It reiterated that it believed its moves to inject more liquidity into the banking system to help struggling financial institutions would help them, and in turn the economy overall.
    With the Fed’s decision out of the way, Wall Street was still focused on troubled insurer American International Group Inc., the latest in a string of companies investors are worried could be undone by a shortage of cash.
    ‘‘This was the right thing to do,’’ said Tom Higgins, chief economist at Payden & Rygel Investment Management in Los Angeles. ‘‘I just don’t think the Fed should be responding to the financial market crisis at this stage.’’
    He contends other moves, like broadening the type of collateral the Fed accepts from banks and adding money to the banking system are more effective at addressing credit troubles.
    In midafternoon trading, the Dow rose 95.91, or 0.88 percent, to 11,013.42, but fell about 100 points soon after the Fed announcement. Earlier, the Dow rose as much as 105 points and fell as much as 175 in fractious trading; on Monday, the Dow suffered its largest drop since the September 2001 terror attacks.
    Broader stock indicators fell. The Standard & Poor’s 500 index rose 9.56, or 0.80 percent, to 1,202.26, and the Nasdaq composite index rose 7.80, or 0.36 percent, to 2,187.71.