NEW YORK (CNN/Money) - Mixed December retail sales reports and a pullback in some recent tech leaders kept investors on their toes and major U.S. indexes in constant flux throughout a volatile trading day Thursday.
Chips and software stocks were among the tech names fluctuating above and below the break even point on the Nasdaq composite throughout the day, while weakness in 3M (MMM: down $1.45 to $113.20, Research, Estimates) and IBM (IBM: down $2.35 to $122.14, Research, Estimates) led the list of Dow decliners.
In the latest batch of monthly retail reports, discount stores such as Wal-Mart continued to fare better than high-end specialty chains, a reflection of the current economic challenges.
"I think bumps in a market that's got upward momentum to it is a good thing," Marty Cunningham, head of Nasdaq trading at Schwab Capital Markets told CNNfn's Street Sweep. "I'm looking forward to the quarterly results that are coming out next week."
The Dow Jones industrial average closed down 26.23 to stand at 10,067.86. The Nasdaq composite index added 2.35 to 2,047.24, while the Standard & Poor's 500 added 1.41 to end the day at 1,156.55.
"You have a little defensive buying as people are making a classic rotation and selling off some of the big-cap techs -- like semis and software -- that have done so well lately and are moving into pharmaceuticals, small biotechs and other names," said Tim Heekin, head of stock trading at Thomas Weisel Partners.
"We're going to see a healthy selloff for a few more days, before we start to rebound," Heekin said.
Asian stocks finished lower Thursday, with Tokyo's Nikkei index down 1.2 percent. European markets closed mixed to lower.
Treasury prices rose broadly, with the 10-year note yield falling to 4.98 percent from 5.06 percent late Wednesday. The dollar declined slightly against both the yen and the euro. Light crude oil futures rose 27 cents to $20.45 a barrel in New York.
Market breadth was mixed. On the New York Stock Exchange, decliners and advancers were split as 1.27 billion shares changed hands. On the Nasdaq, losers and winners also were evenly divided as 1.74 billion shares were traded.
Tech, retail issues in focus
On the Nasdaq, most chipmaker, software, and networking stocks were lower, but only modestly so, with Intel (INTC: down $0.71 to $34.65, Research, Estimates), Cisco Systems (CSCO: up $0.15 to $21.00, Research, Estimates) and Sun Microsystems (SUNW: down $0.05 to $13.53, Research, Estimates) the most actively traded issues.
Merrill Lynch issued a cautious note on Apple Computer (AAPL: down $0.42 to $21.23, Research, Estimates), saying the company's December-quarter results could be weak due to iMac sales, with many consumers deferring purchases until early 2002.
Storage data systems maker Brocade Communications (BRCD: up $1.02 to $40.40, Research, Estimates) rose in active trading on a pair of positive statements from Salomon Smith Barney and Goldman Sachs.
No. 1 automaker General Motors (GM: down $0.17 to $50.07, Research, Estimates) raised its forecast. The company projected that it earned 60 cents a share in the fourth quarter, while analysts surveyed by First Call have expected profit of 54 cents a share.
Among the big names posting results was Wal-Mart Stores (WMT: up $0.60 to $57.00, Research, Estimates), which said December sales at stores open at least a year rose 8 percent from the same period a year earlier.
Kmart (KM: down $0.60 to $4.20, Research, Estimates) was down after news that its December sales fell 1 percent from a year ago and that it expects its results for the fiscal year to miss analysts' current expectations.
Clothing retailer Gap (GPS: up $1.83 to $16.35, Research, Estimates) traded higher after it said it expects a fourth-quarter loss no worse than 6 cents a share, which is better than analysts currently expect. The company also said December sales fell 11 percent from a year ago, but the figure was actually better than what had been forecast.
Clothing chain Pacific Sunwear (PSUN: up $1.39 to $22.79, Research, Estimates) reported a 4.1 percent increase in December sales. Due to the stronger-than-expected results, the company now expects fourth-quarter earnings to be 40 or 41 cents a share, topping previous expectations of 35 cents per share.
No, 3 U.S. drugstore chain Rite Aid (RAD: down $1.08 to $3.01, Research, Estimates) was downgraded by Merrill Lynch after the company reported a wider-than-expected fiscal third-quarter loss and cut its sales outlook for the rest of the fiscal year. The company also said December sales rose 6.8 percent from a year earlier.
J.C. Penney (JCP: down $0.53 to $26.00, Research, Estimates), warehouse club Costco (COST: up $0.55 to $44.70, Research, Estimates), and other retailers also posted gains for the month, while Federated Department Stores (FD: up $0.74 to $42.00, Research, Estimates) was among the decliners.
In the day's economic news, the number of Americans filing new unemployment claims fell to 395,000 last week from an upwardly revised 451,000 the previous week. 
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