Stocks Weighed Down by Selling Pressure

Updated from 2:00 p.m. EST

Stocks in New York continue to trade with losses but have recovered off their session lows in the final hour of trading Tuesday as investors digest the latest corporate earnings warnings and await word on an expected bailout of the U.S. auto industry.

The Dow Jones Industrial Average was losing 250 points at 8683, and the S&P 500 was slumping 21 points at 888. The Nasdaq, up some 34 points earlier in the session, was down 20 points at 1551.

"It's really more of the same volatility that we've seen over the past several weeks," says Richard Sparks, senior equities analyst at Schaeffer's Investment Research. "It's the third 20% rally that we've seen in the S&P since mid October, and the previous two have reversed fairly hard and led to new lows."

Tuesday's downturn marks a reversal after two days of gains in the face of negative news, and that begs the question of what might already have been priced into the market. "It's very difficult to know," says Sparks, who characterizes the action for investors as a tug of war between what some say is a historic buying opportunity against the fact that we simply don't know where the bottom is.

"The problem is that [predictions for a turnaround] use historical context to frame their outlook, and I'm not so sure that this time isn't different than most bear markets we've been in," Sparks says.

While the solidification of an automakers' bailout seemed imminent Monday, the details remain unresolved Tuesday. Under proposed legislation submitted to the White House yesterday afternoon by Congress, the Big Three automakers -- Ford (F), General Motors (GM) and Chrysler -- would receive up to $15 billion in emergency aid.