Stocks fluctuate after Buffett-Goldman deal

By TIM PARADIS, AP Business Writer 9 minutes ago

NEW YORK - Financial markets gave mixed signals Wednesday, with stocks stabilizing following investor Warren Buffett's $5 billion bet on Goldman Sachs Group Inc. but the credit markets showing added strain as they await news about the government's plan to rescue banks from crippling debt.

Buffett's Berkshire Hathaway Inc. said Tuesday it was investing at least $5 billion in Goldman — a move Wall Street took as strong sign of support for the independent investment bank model. Besides buying $5 billion in preferred stock, Berkshire also got warrants to buy another $5 billion in Goldman's common stock.

Goldman Sachs also said it will sell $5 billion worth of common stock to the public; the company and Morgan Stanley earlier this week were granted approval to become bank holding companies, which would help them strengthen their balance sheets.

Though Buffett's move soothed nervous investors, it could also lead to new questions from lawmakers for Treasury Secretary Henry Paulson, a former co-CEO of Goldman Sachs. He and Federal Reserve Chairman Ben Bernanke are scheduled to appear before Congress for a second day Wednesday to brief lawmakers on a $700 billion bailout measure for financial services firms.

Their appearance on Capitol Hill Tuesday unnerved investors, who questioned whether lawmakers were beginning to doubt the necessity and form of the government bailout.

In the first hour of trading, the Dow Jones industrial average fell 16.25, or 0.15 percent, to 10,837.92. The Dow is down more than 4 percent for the week.

Broader stock indicators were mixed. The Standard & Poor's 500 index fell 2.23, or 0.02 percent, to 1,186.17, and the Nasdaq composite index rose 4.62, or 0.21 percent, to 2,157.95.

In the bond market, demand for short-term government Treasuries remained strong as investors again sought safe places to keep cash. The yield on the 3-month Treasury bill, considered the safest short-term financial asset, was at 0.42 percent early Wednesday, down from 0.79 percent late Tuesday. In other Treasury trading, the yield on the benchmark 10-year Treasury note fell to 3.77 percent from 3.80 percent late Tuesday.

The dollar, whose struggles earlier this week contributed to extreme volatility in other markets, was mixed, falling against the euro but rising against the Japanese yen.