Stocks trimmed their losses but closed lower Thursday afternoon amid reports that a top al Qaeda member had been cornered near the Afghanistan-Pakistan border. The Dow Industrials lost 4.52 points, or 0.04%, to close at 10,295.78 after a two-day, 200-point rally; the S&P 500 finished down 1.44 points, or 0.13%, to 1122.31; and the Nasdaq lost 14.32 points, or 0.72%, to 1962.44, after being down more than 1% earlier in the session. Trading volume on the New York Stock Exchange approached 1.4 billion shares, while nearly 1.7 billion shares changed hands on the Nasdaq. Decliners outpaced advancers on both exchanges by about 5 to 4. "There was some excitement about the idea that Osama bin Laden might be captured," said Brian Pears, head equity trader at Victory Capital Management. Later reports indicated it was not bin Laden, but the group's No. 2 member. Richard Williams, equity strategist at Summit Analytic Partners, said the afternoon rally was just a "corrective bounce" that will likely be unsustainable. "We'll probably go to 1130 or 1140 on the S&P, but investors are seeing such a consistent, steady flow of data that suggests the economy is slowing that it's hard to get excited about the quarter," he said. Nevertheless, the afternoon enthusiasm marked a notable reversal of earlier declines, triggered by the recent surge in oil prices, mixed economic data and continuing legal headaches for Microsoft ( MSFT). "We're still in a correctional phase," said Larry Wachtel, senior market analyst at Wachovia Securities. "It was rather vicious last week because of emotions, and we've come back from that, but we're still in a correctional phase that I think will last through March." "I think the April earnings season could be a positive catalyst that will get us back on track," added Wachtel. The 10-year Treasury note traded down 10/32, to yield 3.75%. The yen surged against the dollar after Japan's finance minister suggested for a third day that Tokyo may scale back currency sales. The dollar recently bought 106.72 yen, compared to 108.27 at Wednesday's close. The euro was also stronger, buying $1.2382 compared to $1.2237. Overseas markets were mostly lower, with London's FTSE 100 closing down 1.3% to 4398 and Germany's Xetra DAX losing 1.8% to 3827. In Asia, Japan's Nikkei gained 0.4% to 11,484, while Hong Kong's Hang Seng lost 1.2% to 12,816. Crude oil was lower in New York trading after futures touched a 13-year high Wednesday on concerns about tightening gasoline inventories in the U.S. The April futures contract was off 30 cents to $37.88 on the Nymex.