Updated from 3:16 p.m. EDT

Stocks in New York pulled back Wednesday from their day-earlier advance, but the decline was fairly moderate for blue chips and tech shares.

The Dow Jones Industrial Average fell 85.78 points, or 1.2%, to 7400.80, while the S&P 500 gave up 10.31 points, or 1.3%, to 784.04. The Nasdaq lost 7.74 points, or 0.5%, to 1483.48.

Citigroup ( C), Bank of America ( BAC) and JPMorgan Chase ( JPM) all dropped.

Equities have had multiple positive sessions over the past week, but there's little real money coming back into stocks, says Anu Sharma, managing director of the Nasdaq Market Intelligence Desk. "For the most part, it's been a good amount of short-covering, led by financials, and momentum trading.

"We've seen some of the blue chips selling into the rallies, and when you see some of the bigger firms selling into a rally, that shows you there's not much conviction, and people are willing to take profits," says Sharma. "If there were conviction, they'd be buying into it. This is an indication that the buy side may not be on board with the rally."

People are still saying it's just a short-covering rally, "but every secular bull market in history has started out as short-covering rally," says Jeffrey Saut, chief investment strategist at Raymond James. "The time to be bearish and cautious was last November, not now, after a 57% decline."

Initial jobless claims were released this morning and continue to reflect the recessionary environment. However, the numbers did fall slightly to 646,000 in the week ended March 19, from 658,000 a week prior, and were slightly fewer than expected.

Also, AIG ( AIG) continued to rile lawmakers who are livid over the big bonuses being handed out. In the latest development, the U.S. House of Representatives voted to pass a bill that would impose a 90% tax on the bonuses paid out by companies receiving more than $5 billion in bailout money.

Meanwhile, General Electric ( GE), forecast a profitable first quarter and full year for its struggling finance unit. Late in the day, aluminum producer Alcoa ( AA) announced a stock and notes offering expected to raise $1.3 billion. The news boosted the stock more than 16%.

FedEx ( FDX) missed estimates with its third-quarter results, and said it will cut back spending by $1 billion a year.

In tech, a day after reports emerged that IBM ( IBM) was considering a bid for Sun Microsystems ( JAVA), Microsoft ( MSFT) said it might still be interested in Yahoo! ( YHOO).

Looking at commodities, oil rose $3.47 to settle at $51.61 a barrel, while gold surged $69.70 to $958.80 an ounce. Stocks in Europe were largely higher, and stocks in Asia were mixed.

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