Updated from 4:12 p.m. EDT

The major averages ended a rocky session with losses Thursday, as more rumors about corporate scandal and troubling news from the chip sector had investors on edge the day after Wall Street's big rally.

The

Dow Jones Industrial Average finished with a loss of 4.98 points, or 0.1%, to 8186.31. The

Nasdaq plunged 50.15 points, or 3.9%, to 1240.08, and gave back the bulk of the ground it gained in the previous session. The

S&P 500 fell 4.75 points, or 0.6%, to 838.68.

Blue-chip investors were dealt a temporary setback with about 90 minutes left in the trading day, when a report surfaced that regulators were probing the relationship two of the world's biggest banks had with bankrupt energy trader

Enron

.

The report, which appeared on

Bloomberg

, cited a source who said the

Securities and Exchange Commission

is pursuing evidence that

Citigroup

(C) - Get Report

and

J.P. Morgan

(JPM) - Get Report

"had a clear understanding of Enron's intention to mislead investors and played a necessary role in the alleged fraud."

In recent days, both banks have said they did nothing wrong in their Enron dealings. J.P. Morgan's own defense of its role in the Enron matter was credited as being one of the main catalysts behind the prior day's big rally. But as word of the story spread, the averages tanked before investors began to dismiss the importance of the report.

Elsewhere on the corporate front, media titan

AOL Time Warner

(AOL)

said that the SEC has launched an investigation of its accounting practices, but contends that reports of misdeeds at the company are without merit. Shares of AOL traded down 15% to $9.64, closing at a 52-week low.

The news about the SEC's inquiry came out as the company was reporting second-quarter earnings of 24 cents a share, excluding certain expenses, 2 cents better than estimates and even with the year-earlier figure. Revenue of $10.6 billion was ahead of the consensus of $10 billion analysts were expecting.

The semiconductor group was under considerable pressure after

Taiwan Semiconductor

(TSM) - Get Report

, the world's largest contract chipmaker, reported lower-than-expected earnings and provided a gloomy outlook for the coming months. Taiwan Semi fell 18% to $9.08, and the Philadelphia Stock Exchange Semiconductor Index was lost 10%.

Biotechnology giant

Amgen

(AMGN) - Get Report

saw its shares rise 13% to $41.94 after Banc of America raised its investment rating on the stock to buy from market perform following the company's latest quarterly report. Amgen posted better-than-expected earnings after the close Wednesday.

One of the big winners of the day was

Hershey Foods

(HSY) - Get Report

, which rose 25% to $78.30 after the chocolate and candy giant's controlling trust said it is searching for a potential buyer. Another company in the food and beverage sector,

Anheuser-Busch

(BUD) - Get Report

, said Wednesday that quarterly profits rose 12% as sales of its new drink Bacardi Silver helped boost sales in North America. Anheuser added almost 3% to $47.45.

In economic news, the Labor Department said

initial jobless claims fell to 362,000 in the week ended July 20 from 383,000 the previous week. Economists were expecting the number of first-time jobless insurance claims to come in at 385,000.

Separately,

durable goods orders surprisingly dropped 3.8% in June, the largest decline since November 2001. The data came in well below the consensus estimate of a 0.5% increase.

U.S. Treasury issues were higher around 4 p.m. EDT. The 10-year note was up 20/32 at 103 26/32, yielding 4.379%. The bond was gaining 21/32 to 101 3/32 and yielding 5.299%.

In Europe, London's FTSE 100 rose 5% at 3966. Germany's Xetra DAX was lower by 3.1% at 3520. Japan's Nikkei 225 fell 3.1% to 9930, while Hong Kong's Hang Seng closed down 0.9% to 9885.