NEW YORK – Stocks made a dramatic late-day turnaround Wednesday as news of a U.S. military refueling plane crash in Pakistan and gnawing concerns about an overpriced market overshadowed upbeat forecasts from technology bellwethers Cisco Systems Inc. and Oracle Corp.
"There are going to be more deaths," said Ned Collins, a trader at Daiwa Securities America. "It's just a constant reminder."
The blue-chip Dow Jones industrial average lost 56.46 points, or 0.56, to 10,094.00. Earlier, the Dow rallied more than 1.2 percent. The broader Standard & Poor's 500 Index fell 5.57 points, or 0.48 percent, to 1,155.14. The technology-laced Nasdaq Composite Index ended down 10.85 points, or 0.53 percent, at 2,044.89, after it had rallied 2.1 percent earlier in the session.
Stocks pared gains in the early afternoon after U.S. officials said a military refueling plane, carrying seven U.S. Marines, crashed into a mountain in Pakistan while trying to land at a base used by American forces fighting in Afghanistan.
Cisco, Oracle and European software giant SAP AG sparked a rally much of the session, but investors opted to lock in profits late in the day.
Investors are questioning whether the market is due for a pullback after its massive surge off 3-year lows hit on Sept. 21 in the wake of the assaults on the United States.
"When you look at where we were in late September and where we are now, earnings are still in question and there is a lot of work that needs to be done," Collins said. "Are we ahead of ourselves? Is the glass half full or half empty?"
The market also reacted to comments from Robert McTeer, the president of the Federal Reserve Bank of Dallas, who said an aggressive interest-rate-cutting campaign begun just over a year ago has been helpful in providing a base for recovery. But he noted the central bank would have liked more impact.
The fourth-quarter earnings season heats up next week and should bring the worst quarterly performance since the last recession in 1990-1991. Investors had been content to funnel money into the market on bets for better results later in 2002, but now worries have emerged an economic rebound has already been baked into prices.
"The sense out there is that a lot of the anticipation of an economic recovery has been factored into valuation already," said Peter Coolidge, senior equity trader at Brean Murray & Co. "People wonder how much more room on the upside is left if we have a normal recovery."
"What we need to see in order for (a sustainable rally) is real earnings improvement and I don't think we are really going to see that for the next few months," said Edgar Peters, chief investment officer at PanAgora Asset Management Inc., which manages $15 billion.
The number of winners matched losers on the New York Stock Exchange, while declining stocks edged out advancing stocks on Nasdaq. More than 1.5 billion shares changed hands on the Big Board and more than 2.3 billion on Nasdaq.
Cisco, the No. 1 maker of gear that powers the Internet, turned tail with the market, ending down 10 cents at $20.85 after holding gains through much of the day. Cisco said the outlook for growth in the economy and technology industry is still murky, but it expects to expand its market share and make several small acquisitions.
Oracle managed to hold onto gains, finishing up 98 cents to $16.73. The world's No. 2 software maker said it is upbeat about 2002, given the expected economic uptick.
SAP, Oracle's rival, rallied $3.22 to $36.44. The German company said software sales have risen faster than analysts had expected.
Struggling personal computer maker Gateway Inc. sank 98 cents to $6.71 after bond-rating service Moody's cut its credit ratings to junk status and warned of a further downgrade. Gateway fell Tuesday after saying sales would likely miss targets.
Homebuilder Lennar Corp. rose $1.73 to $48.75, after saying earnings rose about 50 percent, beating estimates, as low interest rates bolstered demand for housing.
Merrill Lynch & Co. rose $1.55 to $57.99. The No. 1 U.S. brokerage said it will take a $2.2 billion quarterly charge to pay for about 9,000 job cuts, but Merrill said its restructuring is winding down and it has seen the worst of the downturn.
Pfizer Inc. rose 46 cents to $40.05 after the world's No. 1 drugmaker reiterated previous forecasts calling for 2002 profits in line with Wall Street expectations, standing by an identical announcement made last month. Pfizer is one of the few large drugmakers not yet hit by patent expirations on key drugs.
The Russell 2000 index, which tracks the performance of smaller company stocks, fell 3.16, or 0.6 percent, to 494.74.
Overseas, markets were mixed Wednesday with Japan's Nikkei stock average finishing down 0.3 percent. In afternoon trading in Europe, Britain's FT-SE 100 closed down 0.4 percent, while France's CAC-40 advanced 0.4 percent and Germany's DAX index rose 1.0 percent.
Reuters and the Associated Press contributed to this report.