Blue-Chips Get Walloped After Wednesday's Rally

However, the Nasdaq and Russell declined only modestly.
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Interest rate worries in part helped send stocks sharply lower as the blue-chip

Dow Jones Industrial Average

and

S&P 500

gave back -- and then some -- the gains they made yesterday.

The

Nasdaq Composite Index

and the

Russell 2000

, however, declined only modestly.

The Dow had fallen as much as 267.90 to 10,434.26 during the session before coming off its lows. Major market barometers all hit their session lows around 2 p.m. EDT.

Decliners pounded advancers on both the

New York Stock Exchange

and the

Nasdaq Stock Market

.

On the NYSE, decliners beat advancers 1,897 to 1,043 on 813 million shares. On the Nasdaq, losers beat winners 2,216 to 1,615 on 826 million shares.

On the NYSE, 42 issues set new 52-week lows while 27 touched new highs. On the Nasdaq, 46 issues set new lows while new highs totaled 42.

On the Big Board,

America Online

(AOL)

was most active, with 20 million shares changing hands. It was down 4 5/16 to 116.

On the Nasdaq,

Dell

(DELL) - Get Report

was most active, with 30.8 million shares changing hands. It was unchanged at 34 1/2.

Market data above are preliminary. Updated numbers and analysis will follow in the Market Roundup

3:01 p.m.: Rumors of Impending Rate Hike Pummel Stocks

Rumors the

Fed

is going to hike rates before the next

FOMC

meeting June 29-30 have helped send the

Dow Jones Industrial Average

and the

S&P 500

precipitously lower. However, the two indexes have managed to climb off a painful bottom going into the final hour of trading.

"I don't put much stock in it," said Bill Kirby, co-head of government securities trading at

Prudential Securities

. "Will they raise rates at the June 30 meeting? Probably, but I don't think they'll do anything before it -- that's not the way they've been operating lately."

The Dow bottomed around 2 p.m. EDT. At its lows, it fell as much as 267.90 to 10,434.26.

The S&P 500's hit its intraday low of 1277.31 around 2 p.m. EDT also.

Volume's not that big, so it's not like the selling is panic selling, noted Louis Todd, head of equities trading at

J.C. Bradford

.

Traders noted that most of the selling was concentrated in big caps.

Going forward, Todd said he thinks "people are looking for a tougher market after Memorial Day. I just don't see anything out there as a catalyst to send stocks higher."

On the

New York Stock Exchange

decliners were beating advancers 1,964 to 928 on 614 million shares. On the

Nasdaq Stock Market

losers were beating winners 2,165 to 1,521 on 642 million shares.

On the NYSE, 39 issues had set new 52-week lows while 26 had touched new highs. On the Nasdaq, 39 issues had set new lows while new highs totaled 36.

On the Big Board,

America Online

(AOL)

was most active, with 17 million shares changing hands. It was down 1 7/8 to 118 7/16.

On the Nasdaq,

Dell

(DELL) - Get Report

was most active, with 24 million shares changing hands. It was down 1/8 to 34 7/16.

-- David A. Gaffen contributed to this report.

1:59 p.m.: Stocks Trade Near Session Lows

The market's major indexes were trading around their session lows this afternoon, with blue-chips leading the way on the downside.

Meanwhile, the Treasury market continued to behave poorly.

The blue-chip

Dow Jones Industrial Average

was suffering the biggest percentage fall, followed not far behind by the

S&P 500

.

On the economic front, the

Commerce Department

said revised first-quarter

gross domestic product

rose at a strong 4.1% annual rate, instead of the previously reported 4.5% pace, data which was in line with expectations.

Market internals were poor.

On the

New York Stock Exchange

decliners were beating advancers 1,937 to 904 on 520 million shares. On the

Nasdaq Stock Market

losers were beating winners 2,135 to 1,444 on 549 million shares.

On the NYSE, 33 issues had set new 52-week lows while 24 had touched new highs. On the Nasdaq, 36 issues had set new lows while new highs totaled 34.

On the Big Board,

America Online

(AOL)

was most active, with 14 million shares changing hands. It was down 4 to 116 5/16.

On the Nasdaq,

Dell

(DELL) - Get Report

was most active, with 20 million shares changing hands. It was down 11/16 to 33 13/16.

12:58 p.m.: Midday Musings: Now We Know: Yesterday's Bounce Wasn't Real

12:02 p.m.: Nasdaq Sneaks Into Positive Territory in Volatile Trading

Stocks were mostly lower but off their worst levels of the session late this morning in volatile trading as the tech-heavy

Nasdaq Composite Index

rallied off its lows and rose slightly into positive territory.

3M

(MMM) - Get Report

was the biggest drag on the

Dow Jones Industrial Average

, accounting for 17 points of the average's loss. The Dow, at its session nadir, fell as much as 167.09 to 10,535.07, before coming off that level.

The Nasdaq Comp at its intraday low had fallen nearly 1% before rebounding.

A couple of stocks that made their trading debuts yesterday with strong first-day gains were padding those advances.

Online broker

DLJdirect

(DIR:NYSE), which rose solidly yesteday in its initial day of trading, was up sharply today, rising 8 1/2, or 28%, to 38 1/2.

StarMedia

(STRM:Nasdaq), which has been dubbed by some as the

America Online

(AOL)

of Latin America, extended the sharp gains it enjoyed yesterday and was up 11 3/4, or 45%, to 37 11/16.

On the

New York Stock Exchange

, decliners were beating advancers 1,631 to 1,006 on 332 million shares. On the

Nasdaq Stock Market

, losers were beating winners 1,804 to 1,498 on 371 million shares.

On the NYSE, 24 issues had set new 52-week lows while 22 had touched new highs. On the Nasdaq, new highs and new lows both totaled 27.

On the Big Board, America Online was most active, with 11 million shares changing hands. It was down 2 7/16 to 117 7/8.

On the Nasdaq,

Intel

(INTC) - Get Report

was most active, with 14 million shares changing hands. It was up 2 to 53 11/16.

Tech Focus

Most tech sector gauges were mixed late this morning, off their intraday lows, as the

Philadelphia Stock Exchange Semiconductor Index

was notable on the upside, up 3%.

Elsewhere, the

Nasdaq 100

the

Morgan Stanley High-Tech 35

and the

Philadelphia Stock Exchange Computer Box Maker Index

were all down fractionally.

Level 3

(LVLT)

was slightly higher, up 1 1/2 to 77 3/4, while

broadcast.com

(BCST)

fell 1 3/8 to 104, after the companies said they set a five-year strategic alliance aimed at advancing broadband delivery of streaming media.

11:01 a.m.: Stocks Lower in Choppy Trading After Wednesday's Rally

Memories of

yesterday's rally are fading quickly, as stocks overall have slumped.

Stocks have traded in choppy fashion this morning. Decliners were beating advancers, while among the market's major indices, the blue-chip

Dow Jones Industrial Average

was giving up the most ground.

Meanwhile in the news,

Infinity Broadcasting

(INF) - Get Report

announced it is buying

Outdoor Systems

(OSI)

for $6.5 billion in stock, plus the assumption of approximately $1.8 billion of debt. Infinity was down 1 11/16, or 6%, to 24 5/16, while Outdoor Systems was off 7/16 to 28 3/8.

Internet stocks tumbled, as

TheStreet.com Internet Sector

index slipped after enjoying a brief foray into positive territory earlier. Internet stocks, which basically have been in a bear market for a while, began to repair their recent damage yesterday. However, a chunk of those advances have been relinquished today.

In a report today,

Goldman Sachs

said the selloff in the sector has been overdone. The report said that "with improving fundamentals and expectations of several near-term catalysts, this selloff presents an opportunity to build further positions in leadership names."

IBM

(IBM) - Get Report

was softer in its first day of trading post-split. It was off 3 1/8 to 115. Big Blue ran up sharply yesterday ahead of the split. IBM, which powered about 70 points of the Dow's gain yesterday, was the biggest drag on the average today.

Bank stocks were tumbling again. The

Philadelphia Stock Exchange/KBW Bank Index

was down 2%. Among other sectors suffering some weakness were brokerages and forest and paper products issues. The

American Stock Exchange Broker/Dealer Index

was down 2%, while the

Philadelphia Stock Exchange Forest & Paper Products Index

was also down 2%.

Computer makers and semiconductor stocks were lower. The

Philadelphia Stock Exchange Computer Box Maker Index

was off 1%.

On the economic front, the

Commerce Department

said revised first-quarter

gross domestic product

rose at a strong 4.1% annual rate, instead of the previously reported 4.5% pace.

On the

New York Stock Exchange

, decliners were beating advancers 1,619 to 870 on 227 million shares. On the

Nasdaq Stock Market

, losers were beating winners 1,800 to 1,286 on 259 million shares.

On the NYSE, 18 issues had set new 52-week lows while 15 had touched new highs. On the Nasdaq, 24 issues had set new highs while new lows totaled 23.

On the NYSE,

AT&T

(T) - Get Report

was most active, with 8 million shares changing hands. It was up 1/4 to 57 1/2.

On the Nasdaq,

Intel

(INTC) - Get Report

was most active, with 11 million shares changing hands. It was up 2 3/8 to 54.

9:59 a.m.: Nasdaq in the Black After Brief Stumble

Major market gauges fell at the open but have since bounced off their lows and the

Nasdaq Composite Index

has managed to climb into positive territory.

In the news,

Infinity Broadcasting

(INF) - Get Report

has agreed to buy

Outdoor Systems

(OSI)

for $6.5 billion in stock. Last week

CNBC

reported Infinity's pursuit of Outdoor Systems.

Most Up at Open -- NYSE

Providian Financial (PVN) , up 7 11/16 to 88 1/4

:

PaineWebber

and

Salomon Smith Barney

both upgraded Providian today.

Most Up at Open -- Nasdaq

Heftel Broadcasting (HBCCA) , up 3 1/4 to 60 11/16

:

Standard & Poor's

said Heftel will replace

Lawter International

(LAW)

in its

S&P MidCap 400 Index

.

Most Down at Open -- NYSE

Hewlett-Packard (HWP) , down 2 3/8 to 91 1/8

.

Most Down at Open -- Nasdaq

CustomTracks (CUST) , down 4 to 50 3/4

.