BAE Systems led the way today, up more than 3% as the wider market just about managed to stay in positive territory.
After yesterday's rousing performance the FTSE 100 put on a far more uncertain show, up 25.5 points at 6306.2 by the close. Dealers pointed out that eight of the top 100 companies went ex-dividend, which knocked around 4.5 points off the index.
These included Standard Life, down 3.5p to 288.75p, miner BHP Billiton, 15p lower at £14.56, and Diageo, down 9p to £10.50.
Also falling was ITV after a strategy update from chairman Michael Grade. Analysts liked the plans but warned the turnaround was already factored into the share price. ITV slipped 1.7p to 111p.
Back to BAE. Its shares climbed 14.75p to 478.25p on news it had entered talks with the US Department of Defense about supplying 10,000 military trucks in a deal which could be worth $4bn. Investors are also waiting for confirmation of a £20bn Saudi Arabian deal to supply 72 Eurofighter Typhoons, which some believe could come any day soon.
It was still a nervous time for most traders, though, with the worries about the current credit crunch refusing to go away. Some £70bn of commercial paper is due to be refinanced in the next few days.
Shareholders in the major banks were unsettled as traders reported growing talk of a serious financial crisis once the full extent of the credit problems are realised.
Panmure Gordon issued a note which concluded: "Given the extreme volatility of recent months, we have made preliminary, indicative downgrades of forecasts and price targets for all our banks. We maintain sells on Barclays, HSBC, Bradford & Bingley and Northern Rock, and holds on Alliance & Leicester, Lloyds TSB, RBS and Standard Chartered."
Barclays edged up 0.5p to 608p, but Royal Bank of Scotland - its rival in the increasingly futile bid to buy ABN Amro - lost 4.5p to 541.5p. Northern Rock, widely believed to be heavily exposed to the volatile wholesale money markets, was steady at 672p. Dealers pointed to suggestions the weakened mortgage bank could now find itself a bid target, although some questioned whether this was exactly the right time to buy such a beast.
Bank of England governor Mervyn King gave no help to the beleaguered sector. He released details of a letter sent to the Treasury select committee, in which he made it clear there would be no bail-out for any banks caught up in the credit turmoil. Nor was the Bank overly keen to cut interest rates any time soon, it appeared.
Richard McGuire, a strategist at RBC Capital Markets said: "[The letter is] a balanced summation of the current situation in the financial markets with King seeing the turmoil as a necessary consequence of a mis-pricing of risk with the correction likely to be temporary, albeit perhaps bumpy. While appearing to caution against expectations policy rates will be lowered in response there is some sense the money market crisis may be delivering the tightening flagged by the Bank in August. Finally, the Bank refuses to commit itself to taking additional steps to lower three-month lending rates beyond allowing banks access to the standing facility but at the penalty rate."
Today the three-month rate eased from 6.90375% to 6.90250%, still high in historic terms.
At the same time wage growth in the public sector slowed to its lowest level in nine years, but overall earnings rose by more than expected in the three months to July.
Elsewhere there was edginess after the Nikkei fell on news that Japan's prime minister Shinzo Abe unexpectedly announced his resignation.
Meanwhile the dollar continued to decline as investors bet that the Fed will cut interest rates next week, perhaps by 50 basis points.
Back with equities, Carphone Warehouse climbed 11.5p to 352p awaiting confirmation later today of its promotion to the FTSE 100. Collins Stewart issued a buy note with a 420p target, saying the company was likely to benefit from the continuing turmoil at rival Virgin Media, which is reportedly axing call centre jobs after customers refused to pay for the privilege of dialling up the complaints service.
Drax, which is likely to lose its place in the leading index, edged up 0.5p to 627.5p, despite UBS cutting its price target from 575p to 490p.
Another energy group, International Power, rose 6p to 423.75p after ABN Amro raised its target price from 430p to 520p.
Cigarette group BAT was 42p better at £16.79 as investors sought defensive stocks, while oil companies moved higher as the price of US light crude hit a new peak above $79 a barrel. The rise was prompted by Opec promising only a small increase in output, and an unexpectedly large drop in US crude stocks. BP added 4p to 567.5p and Royal Dutch Shell rose 20p to £20.01.
Also on the way up was Next, 42p better at £19.82, after analysts responded positively to yesterday's half-year figures.
Home Retail Group added 10p to 410.75p on the back of its results today, which showed problems at DIY chain Homebase were outweighed by a good performance from Argos.
Also on the results front, engineer Charter beat forecasts with a 32% profit rise and added 40p to £11.80, while industrial investment group Melrose was 3.5p to 190.25p after it also pleased the City with profits of £12m.
In the sporting arena, Tottenham Hotspur added 14p to 133.5p on vague talk of Russian interest in the Premier League club.
But emerging market investor Ashmore fell 9p to 247p as it announced a placing of 26.8m shares by a non-executive director and other employees, overshadowing a 57% rise in assets under management.
Lower down the market, ILX, the Aim-listed training group, was 6.5p better at 66.5p as it confirmed more share buying by three directors - the chairman, chief executive and finance director.
But Ceres Power, which is making fuel cells for domestic boilers, fell 34p to 262p after a demonstration of a combined heat and power boiler.
Numis analysts said the presentation lacked detail, in particular about the economics of the product. "Ceres claims a £300-a-year saving for a typical household," said analyst David Toms. "Our calculations disagree significantly and suggest the real figure is likely to be less than half of this, for a potential outlay of several thousand pounds. In addition the claimed 2.5 tonnes of CO2 savings look highly optimistic to us."
Libertas Capital advised clients to short Ceres and buy Ceramic Fuel Cells, up 0.25p to 33.75p.
Recruitment group Greatfleet added 0.5p to 15.5p as it confirmed the acquisition of the Qualitas group for up to £4.4m.
Finally Servoca added 2.5p to 42p as it announced full-year profits of £2.7m, although this turned into a £7m loss after exceptional items. The company, formerly Multi Group, is now focused on security and resourcing businesses.