Wall Street ended an erratic session mixed Monday as investors grew more confident that the Federal Reserve will lower interest rates again...

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NEW YORK — Wall Street ended an erratic session mixed Monday as investors grew more confident that the Federal Reserve will lower interest rates again to ward off recession and as they also wrestled with worries about the upcoming earnings season.

The Dow Jones industrial average rose 27.31 to 12,827.49, after moving in and out of positive territory throughout the session.

Microsoft, one of the 30 Dow stocks, gained 23 cents to close at $34.61 a share. Boeing, also a Dow stock, tumbled $2.95 to $82.87.

Broader stock indicators ended mixed. The Standard & Poor’s 500 index rose 4.55 to 1,416.18, and the tech-focused Nasdaq composite index fell 5.19 to 2,499.46.

It was the seventh-straight session of losses for the Nasdaq, which greatly outperformed the Dow and the S&P in 2007.

Last week, in just the first three trading days of 2008, the Dow lost 3.5 percent, the S&P 500 index fell 3.9 percent, and the Nasdaq dropped 5.6 percent.

Investors have grown more optimistic about a rate cut at the Fed’s Jan. 29-30 meeting after last week’s disappointing reports on jobs and manufacturing pointed to a slowing in the economy during December. And, they might get some clues when Fed chairman Ben Bernanke delivers a speech on Thursday.

That optimism kept stocks from falling far during a session that saw the major indexes reverse course several times. But Wall Street remained uneasy as it awaited fourth-quarter earnings season, which unofficially starts Wednesday, when aluminum producer Alcoa posts results.

Analysts said investors will be paying particular attention to financial-services stocks that have been hit hard by the ongoing credit crisis.

“It’s a directionless market with very little for investors to sink their teeth into,” said Jack Ablin, chief investment officer at Harris Private Bank, noting that the S&P 500 stocks still appear overvalued right now ahead of a fourth-quarter earnings season that most investors are pessimistic about.

“The puzzle pieces are not aligning for the stock market right now,” Ablin said.

“I have the feeling the market wants to hear some good news, and that one of these days we’re going to get it and see a tremendous move higher,” said Matt Kelmon, portfolio manager of the Kelmoore Strategy Funds. “We pretty much know the Fed is going to lower rates again, but the real catalyst might come from some of these earnings reports.”