Wall Street pulls back

US stocks pulled back sharply today, erasing most of the previous session’s big gains as investors grew concerned about high commodity prices and the possibility that banks remained vulnerable to further problems from soured debt.

The Dow Jones industrial average fell nearly 300 points after rising 420 on Tuesday.

Some retrenchment was to be expected after the previous day’s huge advance. But the decline also reflected investors’ continuing uneasiness about the world’s financial system and the US economy.

Talk swirled about whether further write-downs were in the offing after Merrill Lynch filed a lawsuit against a company involved in a debt transaction with the company, according to several reports.

Merrill was among the steepest decliners of the financial stocks.

News that the government planned to free up billions of dollars at Fannie Mae and Freddie Mac, a move that could help struggling homeowners, for a time helped quell some of the market’s fears. But it could not stave off selling late in the session by investors who have seen big advances evaporate many times during the course of the credit markets crisis and decided to preserve some of their gains.

Investors sent stocks racing higher on Tuesday on stronger-than-expected investment bank results and several moves from the Federal Reserve in recent days, including a 0.75 percentage point rate cut aimed at jump-starting the credit markets. The Dow had its second 400-plus point gain in six sessions.

The Dow today fell 293.00, or 2.36%, to close at 12,099.66.

Broader stock indicators also declined. The Standard & Poor’s 500 index fell 32.32, or 2.43%, to 1,298.42, and the Nasdaq composite index fell 58.30, or 2.57%, to 2,209.96.