Tech leads stocks on wild ride

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NEW YORK (CNNMoney.com) -- Wall Street endured a roller coaster session Thursday before major indexes finished broadly lower amid weakness in the tech sector and anxiety about the Federal Reserve's next move.

After a late rally, the Dow Jones industrial average (Charts) finished 34 points, or 0.25 percent, lower. The 30-stock index tumbled by as much as 220 points during the session.

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 53 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) ended narrowly lower Thursday.

Stocks slogged through most of the session as investors were troubled by remarks by Federal Reserve Chairman Ben Bernanke about economic growth and inflation.

But a late-session rally by the financial stocks helped major indexes pare some of their early losses.

"Financials rallied pretty smartly 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 the bleeding."

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

Shares of both Lehman Brothers (Charts, Fortune 500) and JPMorgan Chase (Charts, Fortune 500), which had fallen more than 5 percent during the session, both ended slightly higher.

Dragging down the Nasdaq were concerns about growth prospects for technology firms.

Bellwether Cisco Systems (Charts, Fortune 500) lost 9.5 percent Thursday. A day earlier, the company reported better-than-expected quarterly earnings but prompted concerns that corporations will scale back on technology spending in the months ahead.

Other sector leaders followed as shares of Apple Inc. (Charts, Fortune 500) and Google (Charts, Fortune 500) fell more than 5 percent each. BlackBerry maker Research in Motion (Charts) tumbled 6 percent, while Dow component Hewlett-Packard (Charts, Fortune 500) lost over 4 percent each.

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

Much of the markets' attention, however, 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 sparking higher inflation.

While futures markets quickly priced in a 98 percent chance that the Fed will cut interest rates again in December, 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 Thursday, 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.

Retail sales eased for the second straight month in October, major retailers reported Thursday, 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, reported a 6 percent drop in sales at its stores open at least a year, which sent its shares more than 8 percent lower on the New York Stock Exchange.

Market breadth was negative. Decliners edged out advancers on the New York Stock Exchange as 2.19 billion shares changed hands. Losers topped winners on the Nasdaq on volume of 3.5 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 4.28 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.