Another wild ride for stocks

NEW YORK (CNNMoney.com) -- The Dow industrials staged a late-session rally Thursday to finish modestly lower, helped by strength in the financial and transport sectors, while the Nasdaq ended sharply lower.

The Dow Jones industrial average (Charts) finished 33 points, or nearly 0.3 percent, lower, based on early tallies, after moving into positive territory before the end of the session. Earlier in the day, the 30-stock index tumbled by as much as 220 points.

A day before, the Dow posted one of its biggest single-day declines, falling 361 points on credit market fears.

The tech-fueled Nasdaq (Charts) was hit particularly hard, falling 52 points, or about 1.9 percent, with less than an hour to go in trading after dropping by as much as 100 points.

The broader S&P 500 index (Charts) edged lower Thursday.

"Financials rallied pretty smartly here in the last hour of trading," said Todd Clark, director of stock trading at Nollenberger Capital Partners Inc. in San Francisco. "The market needed this group to do better to stop bleeding."

Shares of Morgan Stanley (Charts, Fortune 500) gained 4.8 percent just a day after the company said it would take a $3.7 billion writedown because of bad bets on subprime mortgages.

But dragging down the Nasdaq were concerns about growth by technology companies.

Bellwether Cisco Systems (Charts, Fortune 500) lost more than 8 percent following analysts' predictions that corporations will scale back on technology spending in the months ahead. The network-equipment maker reported improved earnings late Wednesday, but the results were not as strong as Wall Street had hoped and the CEO expressed worries about future growth.

Other sector leaders followed as shares of Apple Inc. (Charts, Fortune 500) and Google (Charts, Fortune 500) fell more than 6 percent each. Blackberry maker Research in Motion (Charts) tumbled 10 percent, while Dow components IBM (Charts, Fortune 500) and Hewlett-Packard (Charts, Fortune 500) both lost over 5 percent each.

"It's a complete overreaction," said Clark. "It just shows how manic the market is."

Much of the markets' attention was focused on Bernanke's testimony before Congress' joint economic committee. The Fed chief downplayed recession fears, telling lawmakers that the economy should continue to grow in 2008, but at a much slower pace than in recent quarters.

At the same time, he warned that the Fed remained concerned about the subprime mortgage crisis and sky-high oil prices, which pose a risk of higher inflation.

While futures markets quickly priced in a 98 percent chance that the Fed will cut interest rates once again at their December policy meeting, the competing concerns of slower economic growth and higher inflation left investors worried about the central bank's next move.

"They are very reluctant to do more easing in that type of environment," said Keith Hembre, chief economist at First American Funds. "The combination of those two things, frankly, is a bit troubling."

Last week, the Federal Reserve cut the fed funds rate by a quarter percentage point, but hinted that it might not continue to cut rates when policymakers convene again in December.

Before the opening bell, Ford Motor Co. reported it narrowed its losses more than expected. Ford (Charts, Fortune 500) shares finished up 3 percent on the New York Stock Exchange.

Dow component American International Group (Charts, Fortune 500) reported disappointing results after the closing bell Wednesday, blaming the battered housing market and tighter credit conditions.

Retail sales eased for the second straight month in October, major retailers reported Wednesday, a worrisome sign for this year's holiday shopping season.

Wal-Mart (Charts, Fortune 500), the world's largest retailer, reported an increase in sales at the low end of its forecast.

But wholesale club retailer Costco (Charts, Fortune 500) posted better-than-expected results, helped by strong sales outside the United States.

Limited Brands (Charts, Fortune 500), parent of Victoria's Secret and the Bath & Body Works chains, posted a 6 percent drop in sales at its stores open at least a year, which sent its shares over 8 percent lower on the New York Stock Exchange.

Market breadth was negative. Decliners edged out advancers on the New York Stock Exchange as 2.18 billion shares changed hands. Losers topped winners on the Nasdaq on volume of 3.49 billion shares.

Oil prices retreated but continued to remain near record level as light, sweet crude for December fell 91 cents to settle at $95.46 a barrel on the New York Mercantile Exchange. Just a day earlier it reached a new trading high of $98.62 a barrel.

Gold prices continued to remain at record levels as COMEX gold rose $4 to $837.50 an ounce.

Treasury prices soared as a result, lowering the yield on the benchmark 10-year note to 4.27 percent from 4.33 percent late Wednesday.

In currency trading, the dollar again eased against the euro after the European Central Bank voted to keep interest rates unchanged. The greenback was lower against the yen.