Blue-chip stocks tumbled Thursday after Federal Reserve Board Chairman Alan Greenspan signaled that the central bank may raise interest rates next week, but his comments helped drive bonds and the dollar higher.
The battered technology sector attracted some bargain hunting, which helped to snap a seven-session losing streak for the Nasdaq market.
The Dow Jones industrial average fell 57.40 points to 6,820.28.
But a third of that decline came from Philip Morris, which plunged the equivalent of about 18 1/2 Dow points on news that a rival cigarette maker has struck a deal with state prosecutors that may undermine the industry's defenses against health-liability lawsuits.
Most broad stock measures declined less severely than the Dow, having trimmed the day's losses as the Treasury market shook off the latest cautionary tales from Greenspan.
But investors also were seeking out bargains.
One beneficiary was the battered technology sector, whose recent woes have produced a sharp correction over the last two months.
"We passed the 10% correction level [Wednesday] and that seems to be a magical level that brings out the bargain hunters," said Charlie Crane of Key Asset Management.
In testimony to the Joint Economic Committee of Congress, Greenspan said the economy remained strong and called the prospects for continued growth "quite favorable."
But the Fed chairman also repeatedly stressed the importance of prompt action to keep inflation down before it hurts the economy.
The central bank's policymakers meet Tuesday to consider raising short-term rates for the first time in more than two years.
Investors in the bond market initially showed nervousness about Greenspan's remarks, but prices rebounded later in the day.
As the price of the benchmark 30-year Treasury gained, its yield fell to 6.95% from 6.98% on Wednesday.
Declining issues outnumbered advancers by nearly a 5-3 margin on the New York Stock Exchange.
The Standard & Poor's 500-stock list fell 3.12 points to 782.65 and the NYSE's composite index fell 1.81 points to 411.78.
The technology-laden Nasdaq composite index, which had fallen about 5.5% of the previous seven sessions, was boosted by some bargain hunting among bellwether technology issues, rising 9.97 points to 1,259.26.
"Players who are in it for the long haul believe some technology stocks may be reaching bargain-basement levels," said Alan Ackerman, senior vice president at the investment firm Fahnestock & Co.
