A jittery Wall Street pummeled stock prices for most of the trading session yesterday before bargain hunters helped pull prices back up toward the close.
The Dow Jones industrials lost 27.86 points, or 0.27 percent, to close at 10,275.53, but that was far above the intra-day low of about 10,080.
The technology-heavy Nasdaq composite index closed off 5.50 points, or 0.20 percent, at 2756.75.
"Fear is the issue here, an innate insecurity that too much of a good thing has gone on for long," said Michael Farr, president and chief investment officer of Farr, Miller & Washington, a D.C.-based financial-consulting firm.
Bellwethers Microsoft and Intel took big hits. The software giant touched an intra-day low of 89-1/16 but finished at 91-7/16, a little lower than Monday's close of 92 1/8. Intel at one point dipped to 75 1/4 before recovering to finish at 77 1/2. On Monday it had closed at 78-3/16.
Investors, concerned about another round of interest-rate increases, have been driving stock prices down for the past few weeks. The Federal Reserve's rate-policy-setting committee will meet next week to evaluate the economy, though most Fed watchers believe there is little chance the Fed will raise rates next week.
Still, "there's a widespread belief that the Fed's outlook for inflation is not particularly benign, which suggests a possible interest-rate increase" at some point, said Anirban Basu, senior economist at RESI, a research unit of Towson University.
Other worries that have plagued the market in the recent past include a possible flight of investment dollars back into European and Asian markets, which are recovering from severe downturns. "The U.S. market was a haven for investors fleeing risk, and that calculus has now changed," Basu said.
There are also concerns about a slowdown in the earnings of technology companies. At the macro level, investors have been rattled by a widening trade deficit and a softening of the dollar.
A weak dollar, however, will discourage imports and boost exports, thus narrowing the trade deficit. In fact, a narrowing of the deficit is expected toward the end of the year.
Some experts say that given the current economic and corporate fundamentals, a market sell-off is not justified. "I am not unduly concerned about it," said John H. Lee, research director at the Houston-based Pension Management Co. "It's a good buying opportunity."
The market's recovery near the close of trading yesterday was an indication that the fall may be bottoming out, some analysts said. "I expect the Dow to be around the 10,500 level by January," Lee said.