Wall Street finishes erratic day higher

Concerns about mortgage financiers Fannie Mae and Freddie Mac initially dragged down financials. Wall Street is nervous that the government-chartered companies will need a bailout from the Treasury Department, a move that could wipe out shareholders' equity.

The Dow Jones industrial average rose 68.88, or 0.61 percent, to 11,417.43 after being down by nearly 60 points and up more than 100. Concerns about inflation and the financial sector led the Dow to post its worst two-day performance since late June on Monday and Tuesday.

Auction-rate probe focuses on 3 banks

NEW YORK -- New York Attorney General Andrew Cuomo will intensify his probe into auction-rate securities by focusing on Bank of America Corp., Goldman Sachs Group Inc. and Deutsche Bank AG, a person close to the investigation said Wednesday.

The banks are the three biggest players in the auction-rate securities market that have not already reached a settlement with Cuomo, who is seeking deals on behalf of regulators and state authorities. Five major Wall Street firms including Citigroup Inc. and Switzerland's UBS AG have agreed to $42 billion in settlements.

Cuomo has directed staff to spend more time gathering facts and talking to the three banks about the sale of the risky securities, said a person inside the attorney general's office who asked not to be identified by name because he was not authorized to speak publicly about it.

Oil prices rebound as crude numbers jump

NEW YORK -- The price of oil bounced back near $115 a barrel on Wednesday, as traders shrugged off a massive increase in U.S. crude inventories and a stronger dollar and focused on possible supply threats.

It was a volatile day for energy prices, which initially retreated after the U.S. Energy Department said a big gain in imports drove crude inventories up by a hefty 9.4 million barrels in the week ended Aug. 15, a figure much higher than anticipated. Light, sweet crude for September delivery rose 45 cents to $114.98 a barrel on the New York Mercantile Exchange, after rising as high as $117.03 before the inventory data was released, falling as low as $112.61, and then rebounding again.

FDIC sets mortgage plan for borrowers

WASHINGTON -- Thousands of troubled home borrowers with loans from IndyMac Federal Bank will be able to switch to fixed-rate mortgages under a new plan from federal regulators, who seized the bank last month after it became the largest regulated thrift to fail.

Most IndyMac borrowers who are seriously delinquent or in default on their mortgages and can document their situation will be able to switch into loans capped at an interest rate around 6.5 percent, the Federal Deposit Insurance Corp. said Wednesday.

The average U.S. rate on 30-year, fixed-rate mortgages was at 6.52 percent last week, unchanged from the previous two weeks.

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Mortgage application volume hits multiyear low

NEW YORK (AP) -- Mortgage application volume fell last week to its lowest levels in nearly eight years, the Mortgage Bankers Association said Wednesday.

The fall in application volume is the latest sign of a struggling housing market. On Tuesday, a Commerce Department report showed construction of homes and apartments fell in July to the lowest level in more than 17 years.

And while fewer new homes are being built, fewer customers are also refinancing existing mortgages. A sharp drop in refinance volume in recent weeks has been the leading driver of declining application volume.

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Lehman under mounting pressure to take action

NEW YORK (AP) -- The pressure is increasing on Lehman Brothers Holdings Inc. to come up with a plan to restore itself to financial health -- or possibly face the worst-case scenario of selling itself off in pieces and at bargain prices.

The nation's fourth-biggest investment house is considered the most vulnerable amid the financial sector's continuing losses from the credit crisis. This week, Lehman has been the subject of analyst downgrades and projections that it will lose $4 billion in the third quarter. There is rising speculation -- most of it negative -- about its short-term prospects, leading more investors to bail out of Lehman stock, which closed Wednesday at $13.73, well off its 52-week high of $67.73.

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First payments in Vioxx deal to begin Aug. 28

TRENTON, N.J. (AP) -- Partial payments for people claiming withdrawn painkiller Vioxx caused heart attacks will go out starting Aug. 28 under the $4.85 billion settlement between drugmaker Merck & Co. and plaintiffs' lawyers, the claims administrator said Wednesday.

Those payments will amount to about 40 percent of each plaintiff's estimated total payout, but it's unclear how many people will be getting checks in the first batch going out.

The settlement, meant to end the bulk of personal injury lawsuits against Whitehouse Station, N.J.-based Merck, was reached last November. Three years earlier, Merck pulled Vioxx from the market on Sept. 30, 2004, after its own research showed the once-blockbuster arthritis pill doubled the risk of heart attack and stroke. By The Associated Press

The Dow Jones industrial average rose 68.88, or 0.61 percent, to 11,417.43.

Broader stock indicators also ended Wednesday with a gain. The Standard & Poor's 500 index rose 7.85, or 0.62 percent, to 1,274.54, while the Nasdaq composite index rose 4.72, or 0.20 percent, to 2,389.08.

Light, sweet crude for September delivery rose 45 cents to $114.98 a barrel on the New York Mercantile Exchange.

Heating oil futures rose 3.98 cents to settle at $3.1635 a gallon on the Nymex, while gasoline futures rose 4.64 cents to settle at $2.9103 a gallon. Natural gas futures rose 10.1 cents to $8.077 per 1,000 cubic feet.

Brent crude on the ICE futures exchange in London rose $1.11 to $114.36 a barrel.