Market flat; rate worry tempers Fed action

NEW YORK (Reuters) - Stocks were little changed in choppy trade on Tuesday as news of a Federal Reserve plan to shore up the commercial paper market offset dashed hopes of coordinated interest rate cuts by central banks.

Shares of energy companies rose as oil prices rebounded after Monday's tumble. Exxon Mobil , up nearly 3 percent, was the top boost on the Dow, followed by Chevron Corp , up 2 percent.

The Fed's bid to relieve the log jam in the $1.6 trillion commercial paper market buoyed hopes that companies will have unhindered access to cash to run day-to-day operations and lessen the shocks of the credit crisis on the broader economy.

Investors will hear from Federal Reserve Chairman Ben Bernanke, who speaks to a business group at 1:15 p.m.

Shares of big manufacturers, including Caterpillar Inc , fared well. Caterpillar was up almost 4 percent, 3M Co rose 1.1 percent and General Electric gained nearly 4 percent.

"I like this commercial paper market effort that the Fed is doing. It might help us domestically," said Marc Pado, U.S. market strategist AT Cantor Fitzgerald & Co in San Francisco.

"But if we don't see Europe, whether it's the Bank of England or the European Central Bank, taking the kind of steps that we want, then how far can this really go?. The markets want to see a coordinated effort."

The Dow Jones industrial average <.DJI> slipped 16.25 points, or 0.16 percent, to 9,939.25. The Standard & Poor's 500 Index <.SPX> declined 3.41 points, or 0.32 percent, to 1,053.48. The Nasdaq Composite Index <.IXIC> fell 9.05 points, or 0.49 percent, to 1,853.91.

Investors had bet that after Monday's slide in global equity markets, central banks might mount a coordinated response to calm jittery investors.

Instead, the only news of rate cuts came out of Australia, which slashed rates by a full percentage point, and from India, which said it would cut the proportion of deposits that banks keep with the central bank.

Shares of financial services companies were a top drag. Bank of America was down more than 13 percent, a day after it announced a plan to raise as much as $10 billion to shore up its capital. The bank also slashed its dividend and posted a slide in quarterly profit in a surprise announcement.

The interbank overnight and three-month costs to borrow dollars shot up earlier on Tuesday, indicating the continued lack of confidence and that banks were hoarding cash.

(Editing by Kenneth Barry)

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