IS NOT OVER UNTIL IN OVER

U.S. stocks wobbled up Wednesday, with the Dow back above the 13,000 level, after the Federal Reserve's delayed move to funnel additional cash into the banking system appeased, at least for now, the credit-frayed nerves of investors.

"We're still finding out where a lot of these subprime mortgages are held - these things take awhile to filter through," said Owen Fitzpatrick, head of the U.S. equity group at Deutsche Bank.

The Dow Jones Industrial Average (DJI) was up 58 points at 13,088, off an earlier low of 12,957.

Of the Dow's 30 components, 25 were in positive turf, with financials paving the way, with CitiCorp (C) , up 1.7% and J.P. Morgan (JPM) ahead 1.5%.

Dow component Home Depot (HD) gained 1%.

The Dow shifted gears along amid contrarian words from the New York Fed over its repurchases, with the Fed in the end saying it would take $7 billion in a " repo," where it buys securities from dealers, who then put the funds into commercial banks.

"If anything, it just goes to show how sensitive investors are to liquidity conditions," said Mike Malone, trading analyst at Cowen & Co.

The S&P 500 (SPX) gained 8.9 points to 1,435, while the Nasdaq Composite ( RIXF) climbed 10.8 points to 2,509.

At the New York Stock Exchange, volume hit 1 billion shares, while declining issues slightly outpaced advancers 10 to 7. At the Nasdaq, 1.2 billion shares were traded, and advancers only slightly edged ahead of decliners.

More credit woes

Stocks slid on Tuesday, with the Dow falling more than 200 points, amid further signs that trouble in the subprime mortgage market is prompting a tightening of credit.

Wednesday marks a key deadline for some investors because of a 45-day redemption notice period at several hedge funds.

Those, including some run by Goldman Sachs (GS) , are nursing heavy losses, and investors would have to make withdrawal requests by mid-week to get cash by the end of the third quarter. Other hedge funds have lock-up periods running as long as three years.

Japanese banks including Mitsubishi UFJ reported losses from subprime exposure on Wednesday, while the Financial Times reported Bank of America (BAC) and Countrywide Financial (CFC) have refused to lend money when hedge funds use mortgages, collateralized debt obligations and subprime securities as collateral.

Countrywide also was cut to sell from buy at Merrill Lynch, with the broker citing concerns about liquidity in the mortgage sector. Countrywide dropped 8.5% .

"The best case scenario is we don't get any headlines regarding the subprime mess, and maybe we can weather the storm," said Peter Cardillo, chief market economist at Avalon Partners.

KKR Financial Holdings (KFN) announced the sale of $5.1 billion of residential mortgage loans, saying it will no longer invest in such assets, and may need to record a charge of up to $200 million. The company also got a downgrade from Lehman to equal-weight. Its stock fell 24%.

Tame inflation

The Labor Department reported a 0.1% July rise in the Consumer Price Index - a measure of price inflation on food energy and consumer products.

The Federal Reserve monitors the data for signs of rising inflation, the Fed's largest worry. The core consumer price, which excludes volatile food and energy prices, increased 0.2% for the second straight month.

Both the headline and the core reading were in line with economists expectations.

Manufacturing activity in the New York area continued at a healthy pace in August, the New York Federal Reserve Bank said.

The bank's Empire State Manufacturing index inched lower to 25.1 in August from 26.5 in July. Economists were expecting the index to fall to 19.0.

Movers

Goldman cut drinks and snacks giant PepsiCo (PEP) to neutral from buy, citing valuation. The broker told clients it sees stronger potential upside for Molson Coors Brewing (TAP.NV.T) , which it separately upgraded to buy.

H.J. Heinz Co. (HNZ) said it expects to report fiscal first-quarter sales growth of about 9% and earnings per share of 62 cents to 63 cents. Analysts, on average, expect the food company to earn 55 cents a share for the quarter.

Deer & Co.'s (DE) fiscal third-quarter earnings rose 23%, with the agricultural equipment maker reporting earnings for the quarter of $537.2 million, or $2.37 a share, compared with $436 million, or $1.85 a share, a year earlier.

Other markets

On the New York Mercantile Exchange, gold futures fell, with the contract for December delivery falling $4.90 at $674.80 on ounce.

Crude oil and gasoline prices rallied after the Energy Department reported large drops in weekly supplies. Crude oil futures advanced $1.22, or 1.7%, at $ 73.62 a barrel.

Treasury prices were mostly flat, as investors shrugged off U.S. economic data to fixate on credit-market problems. The benchmark Treasury note was up 2/32 at 100 7/32, with its yield (TNX) falling to 4.721%.

The dollar gained against its European rivals, but continued to lose ground against the yen, with the greenback down 0.1% against the yen at 117.3 yen. The euro was down 0.3% at $1.3493.