Updated from 4:09 p.m. EDT

Blue-chips ended mostly lower Tuesday, but well above their worst levels of the session, while tech stocks posted modest gains following an afternoon of wild swings on Wall Street.

The

Dow Jones Industrial Average lost 21.95 points, or 0.2%, to 9687.84. The

Nasdaq rose 15.56 points, or 1%, to 1578.12, and the

S&P 500 tacked on less than a point to settle at 1040.69.

The averages were briefly energized late in the session by a rumor that India and Pakistan reached some sort of truce, but the rally quickly faded as more information about the situation in South Asia became available.

Televised reports just after the speculation started circulating revealed that although tensions could be easing between the nuclear-armed nations, the sides aren't engaged in any discussions. At that point, stocks retreated to near their session lows, but a late rally allowed the indices to recover.

Controversy continued to swirl around

Knight Trading

(NITE)

, which was lower for a second day, this time because of a story in

The Wall Street Journal

that the company is being investigated by federal regulators for alleged illegal trading. The company denied the allegations presented in the story, but the shares fell 22% to $4.64.

Shares of

Flextronics

(FLEX) - Get Report

dropped 20% to $9.89, a 52-week low, a day after the company warned it will miss analysts' earnings and revenue targets. Robertson Stephens cut its price target on the stock to $16 from $21 following the news.

Fellow contract manufacturer

Sanmina-SCI

(SANM) - Get Report

was down 4% to $10.31. Elsewhere in the group,

Celestica

(CLS) - Get Report

was fell 4% to $27.12, and

Solectron

( SLR) slid 5% to $7.33.

Embattled conglomerate

Tyco

(TYC)

was faring better after a brutal session on Monday, when the company announced the resignation of CEO Dennis Kozlowski. Manhattan district attorney Robert Morgenthau announced Kozlowski has been indicted on charges that he conspired to commit sales tax evasion after purchasing $13 million dollars worth of artwork. The stock finished up 4.5% at $16.77.

Revamped PC and computer hardware maker

Hewlett-Packard

(HPQ) - Get Report

said at its first analyst meeting since merging with

Compaq

that second-half revenue will likely fall 5% to 7% from the first half of the year to around $35 billion to $36 billion. The company's chief financial officer said he expects fourth-quarter revenue growth in the high single digits. Shares of H-P rose 0.6% to $18.97.

On the research front, Lehman Brothers analyst Holly Becker lowered her estimates on

AOL Time Warner

(AOL)

, saying that the media giant will have a "more sustained downturn in online advertising than most investors currently anticipate."

Becker also said she believes that "risk remains beyond our estimates and that the timing of a potential turnaround will likely come later than projected by management." AOL shares traded down 5% to $17.20.

Separately, Lehman raised its investment rating on home furnishings retailer

Pier 1 Imports

(PIR) - Get Report

to strong buy from buy, citing the stock's attractive valuation and growth prospects. Elsewhere, SoundView Technology downgraded

Veritas

(VRTS) - Get Report

to buy from strong buy and trimmed its price target to $26 from $34 because of concerns about slower growth in its core market and increasing competition.

Pier 1 was up 3% to $20.21, while Veritas added 6% to $22.23.

After the close Monday, network-storage equipment maker

Brocade Communications

(BRCD)

reaffirmed its third-quarter and fourth-quarter earnings projections thanks to strong demand for its products. Shares of Brocade climbed 9% to $19.99.

Other storage names

EMC

(EMC)

,

JNI

( JNIC),

McData

( MCDTA) and

QLogic

(QLGC)

finished higher.

Airline stocks endured a difficult session after

Continental Airlines

(CAL) - Get Report

reported a 6% to 8% drop in unit revenue for May, falling short of analysts' expectations. Continental dropped 7% to $19.51 on the news.

UAL

(UAL) - Get Report

was down 4.5%,

Delta

(DAL) - Get Report

lost 0.3% and

AMR

(AMR)

gave up 3.3%.

Ford Motor

(F) - Get Report

announced that a joint venture with

Qualcomm

(QCOM) - Get Report

known as

Wingcast

has been dissolved in an effort to conserve cash. Qualcomm, which owns 15% of the wireless data service, will take a third-quarter restructuring charge of up to $11 million as a result of the breakup. Ford was down 2%, and Qualcomm was up 4%.

U.S. Treasuries were weaker around 4 p.m. EDT. The 10-year note was losing 7/32 at 98 27/32, yielding 5.03%. Short-term notes and the long bond were also falling.

European markets were lower. While London's FTSE 100 remains closed for a holiday, Germany's Xetra DAX sank 2.6% to 4626. In Asia, Japan's Nikkei 225 fell 2.1% to 11,653, while Hong Kong's Hang Seng closed down 0.4% to 11,313.