NEW YORK—Wall Street succumbed to its ongoing angst Tuesday, giving up a sharp advance and turning moderately lower after falling oil prices failed to calm the market’s nervousness about the economy and the financial sector.

The Dow Jones industrial average initially surged by nearly 250 points as oil prices dropped as low as $105.46 a barrel on reports that the Gulf Coast and its oil facilities were spared heavy damage from Hurricane Gustav. But the positive effect of the storm’s outcome on stocks was short-lived, and the blue chips ended the day down 26.

Falling commo...

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