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With the Dow Jones industrial average up slightly more than 21 points by the end of trading Monday on the New York Stock Exchange, it may have looked like a calm day on Wall Street.

But under the surface, the scene was far from serene. After policymakers hastily arranged a fire sale of the embattled investment bank Bear Stearns to JPMorgan Chase over the weekend, stocks and other financial instruments fluctuated wildly during much of the day as investors started worrying about who and what would be next on the dock. Traders beat down stocks like Lehman Brothers and commodities like oil and wheat.

After a shaky opening, the worst fears of a market plunge were avoided. Although Fed officials do not place much significance in the performance of markets in a single day, they took some comfort from the fact that many markets were relatively stable on Monday following the initial fall.

But nervousness pervaded Wall Street despite the efforts by the Federal Reserve and the Bush administration to soothe investors who have been on edge for months and assure them that Washington would do everything in its power to restore order to the financial system.

“There is something mixed up in the market,” said Edward Rombach, an analyst at Thomson Financial. “The market is eating itself up.”

In the case of Lehman Brothers, some investors fear that the firm is vulnerable to the same ills that undid Bear Stearns. Like Bear Stearns, Lehman is small and more reliant on the mortgage business than its rivals. Its defenders, though, say that Lehman is much better positioned to ride out the financial storm.

And even as nerve endings remained frayed, there were a few notable signs of improvement on Wall Street, Rombach and other specialists noted. Particularly encouraging was the sharp narrowing of the spread between ultra-safe Treasuries and bonds backed by Fannie Mae, the government-chartered buyer of mortgages — a sign that investors are willing to consider riskier investments.

If that move toward a more normal assessment of risk persists, it could help drive down interest rates on home loans in the coming days. Meanwhile, the broad Standard & Poor’s 500-stock index closed down less than 1 percent, recovering much of its losses from early in the day and bucking a strong downdraft from Europe and Asia.

Specialists say their biggest worry now is not whether the economy is already or will soon be in a recession. Far more fundamental and troubling is the health of the financial system that greases the wheels of capitalism.

“Recessions come and go — that is something investors can deal with,” said Marc D. Stern, chief investment officer at Bessemer Trust, an investment firm in New York. “The bigger issue is: Can our financial system be restored to a sense of normalcy? In recent weeks we have been moving away from that, which is potentially very serious.”

Stern said he was encouraged by the Fed’s response to the problems at Bear Stearns. In addition to facilitating the firm’s sale to JPMorgan, the central bank also started directly lending to securities firms, something it has not taken on since the Depression of the 1930s.