Stocks slip, day two

NEW YORK (CNNMoney.com) -- Stocks tumbled and bonds rallied on Monday afternoon, as investors gave up an early advance sparked by Intel's profit outlook and resumed the previous session's selloff, amid worries about the economy.

Comments from a slew of Fed officials suggesting a rate cut at the upcoming policy meeting is not a done deal added to the day's sense of unease.

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The Dow Jones industrial average (up 12.36 to 13,125.74, Charts) lost around 0.4 percent with roughly 3 hours left in the session, while the broader S&P 500 (down 2.00 to 1,451.55, Charts) index fell 0.7 percent. The tech-fueled Nasdaq Composite (down 3.29 to 2,562.41, Charts) fell 0.4 percent.

Bond prices jumped as stock investors sought safety in other assets. The dollar slipped versus other major currencies. Oil prices fell and gold prices rose.

Stocks had started on a positive note Monday, thanks in part to Intel, but the early advance was unsustainable as investors continued to worry about the broad economy.

"It looks like it's going to be a down day, despite Intel coming in and raising the revenue outlook," said Dave Hinnenkamp, CEO at KDV Wealth Management. "The prevailing concerns of the last four or five weeks remain."

The Dow fell 250 points on Friday after a surprise drop in August payrolls raised worries that the problems in the housing and financial markets are spreading to the rest of the economy.

The weak report raised bets that the Federal Reserve will need to cut a key short-term interest rate when it holds its policy meeting next week.

But those bets were challenged Monday by comments from a number of Fed officials.

San Francisco Fed President Janet Yellen said that although market turmoil could hurt the economy, rate policy isn't there to bail out investors, AP reported.

Earlier, Atlanta Fed president Dennis Lockhart said that the central bank has to take any information on the labor market seriously, but that last Friday's report is backward-looking and should be viewed alongside recent signs of solid retail sales and still-strong consumer spending.

Also, over the weekend, Fed president Charles Plosser said that although the weak August jobs report was not encouraging, it was not reason alone to cut interest rates.

Yellen and Lockhart are not voting members of the Fed's policy committee, while Plosser is an alternate member.

Fed Governor Frederic Mishkin, who is a voting member of the policy committee, speaks later in the session.

The stock market is bound to remain very choppy in the lead up to that meeting, Hinnenkamp said. "I think we're going to see relatively high volatility and any market increases will be met with profit taking."

In corporate news, chipmaker Intel (down $0.04 to $25.43, Charts, Fortune 500) said third-quarter revenue should top estimates, thanks to strong worldwide demand for its products. Shares rose modestly.

However, Intel was a notable standout to the upside, with many large technology shares falling, including Dell (down $0.72 to $26.44, Charts, Fortune 500), Yahoo (down $0.43 to $23.33, Charts, Fortune 500) and eBay (down $0.19 to $35.06, Charts, Fortune 500).

A number of financial stocks fell, as investors continued to worry about the tightening of credit and the impact from the subprime mortgage mess.

Countrywide Financial (down $1.01 to $17.20, Charts, Fortune 500), the poster child for the subprime mortgage fallout, said late Friday that it will cut between 10,000 and 12,000 jobs, or 20 percent of its work force, over the next three months. Shares slipped 5 percent Monday.

A variety of metal and mining stocks fell, including gold, silver, and aluminum.

Aluminum producer Alcoa (down $0.91 to $33.96, Charts, Fortune 500), a Dow component, continued to erode for a second session, losing 4 percent.

A variety of railroad, trucker and airline stocks fell, pulling down the Dow Jones Transportation (down $19.46 to $2,780.03, Charts) average by 1.3 percent.

Market breadth was negative. On the New York Stock Exchange, losers beat winners by 11 to 5 on volume of 610 million shares. On the Nasdaq, losers topped winners by almost 5 to 2 on volume of 900 million shares.

Treasury prices rose, adding on to Friday's big rally on continued bets that the Fed will need to cut interest rates when it meets next week. The advance lowered the yield on the 10-year note to 4.31 percent from 4.38 percent late Friday. Bond prices and yields move in opposite directions.

In currency trading, the dollar fell versus the euro and the yen.

U.S. light crude oil for October delivery fell 60 cents to $76.10 a barrel on the New York Mercantile Exchange.

COMEX gold for December delivery rose $1.30 to $711 an ounce.