(Updated from 10:47 a.m.)

Stocks spun lower at midmorning but were off their lows after the country's biggest bank

Bank of America

(BAC) - Get Bank of America Corp Report

tried to alleviate worries over earlier rumors that it had some nasty news to report. Some were worried that fears of a banking crisis may have spurred the

Fed's surprise cut in interest rates Wednesday.

Trading in Bank of America shares was halted for about 30 minutes pending a news release from the bank. Just after 10 a.m., the bank announced that it does not see any significant derivative losses, that it remains comfortable with its 2001 credit quality guidance and that it has seen no other significant trading losses. The stock opened at 10:30 a.m., 3.4% lower, and lately shares were off 6.7%.

Investors have been nervous about a slowing economy and what looks like a recession to some. Concerns over weakening credit quality and trading losses have put pressure on many of the financial giants lately. Investors are particularly worried about utility company debt, given California's power woes.

Investors were avoiding bank stocks like the plague.

J.P. Morgan

(JPM) - Get JPMorgan Chase & Co. (JPM) Report

was down 5.2% and

Citigroup

(C) - Get Citigroup Inc. Report

was off 2.7%. The

American Stock Exchange Securities Broker/Dealer Index

was off 3.6%.

Revisions of revenue estimates on five blue-chip Dow components didn't help the Dow much.

3M

(MMM) - Get 3M Company Report

was the biggest loser on the Dow after

Lehman Brothers

cut the company's 2001 earnings estimates to $4.80 a share from $5.20, telling investors that it thinks the company is fully valued and that a slowdown in technology spending will affect the bottom line.

Lehman also dropped estimates for aluminum company

Alcoa

(AA) - Get Alcoa Corp. Report

,

Robertson Stephens

cut retailer

Wal-Mart's

(WMT) - Get Walmart Inc. Report

estimates and

UBS Warburg

and

Goldman Sachs

took down PC maker

TheStreet Recommends

Hewlett-Packard

(HWP)

.

Goldman Sachs also lowered its estimates for

IBM

(IBM) - Get International Business Machines (IBM) Report

. 3M was off 5.7%, Aloca was falling .2%, Wal-Mart was down 2.8% and H-P was falling 4.9%. Alcoa and IBM were up slightly. The negative stocks were taking 65 points of the Dow.

Today's

employment report was friendlier than some doomsayers had been predicting.

Mr. Greenspan's unexpected interest-rate cut Wednesday inspired a rip-roaring rally, but had some worried that he knew something the rest of the market didn't -- that the economy was slowing a lot faster than expected. And many were waiting for confirmation of that from this morning's jobs report.

Unemployment remained even with the previous month at 4%, despite forecasts it would rise to 4.1%. New nonfarm payrolls rose to 105,000, just above forecasts of 102,000 and a bit of a rebound from November's surprisingly low 94,000. But growth in average hourly earnings came out just above forecasts at 0.4%, indicating that wage inflation continues to grow. Economists were expecting 0.3%.

The jobs data is considered the best measure of the overall health of the economy and sets the tone for other indicators that will be released this month.

Fears of a recession has had investors selling stocks like mad in recent weeks. A recession is marked by two consecutive quarters of negative economic growth. And while this week's rate cut may not be felt for another three to six months, it is at least a first step toward recovery. Rate cuts take time to trickle through the economy as consumers and companies start capitalizing on the cheaper cost of borrowing and spending money.

The only problem is, the fourth-quarter earnings season begins next week. And it's going to be ugly. The number of companies that have recently lowered their earnings targets for this quarter is astronomical. And even the biggest of bellwethers have disappointed. Last night, a few more companies warned that earnings would be disappointing, including

Sapient

(SAPE)

, an e-business consulting firm, and

Next Level Communications

(NXTV)

, a communications-equipment maker. And as noted above, retailer Nordstrom also warned that earnings would disappoint.

Doing what analysts like to do when bad news comes out,

W.R. Hambrecht

this morning downgraded Next Level to neutral, citing the "significant earnings shortfall." It also lowered its rating on Sapient to buy, due to "near-term market issues".

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Sector Watch

Investors were doing that infamous safety dance again today, throwing cash at defensive energy, tobacco and utility stocks and pulling it from tech and cyclicals. The

American Stock Exchange Natural Gas Index

was 2.5% higher, the

American Stock Exchange Tobacco Index

was up 0.8% and the

Dow Jones Utility Average

was up 1%.

Financial and most tech stocks remained well in the red. Internet, biotech, semiconductor and PC stocks were all underwater.

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>Bonds/Economy

An early rally in treasury prices ahead of the jobs report flattened following the release, but then came back as rumors spread of bad news about the Bank of America, which didn't open until 10:30 a.m. EST. The fears were still there after the bank's announcement about 10 a.m. that everything was OK. Prices had rallied sharply yesterday after Wednesday's selloff sparked by after the Fed's surprise interest-rate cut. The benchmark 10-year

Treasury note was lately up 11/32 at 105 22/32, yielding 4.996%.

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