"The Fed can't really restore trust; the market's reaction today is one of uncertainty," said Kevin Giddis, managing director, Morgan Keegan & Co.
After dropping more than 100 points during the session, the Dow Industrial Average was more recently off 23.8 points, or 0.2%, at 13,450.1, with 21 of its 30 components trading lower, led by Home Depot Inc. , down 3.5%.
The blue-chip index's financials stocks fell as well, with Citigroup Inc. down 3%, J.P. Morgan Chase Co. off 1.6%, and American Express Co. , down 1.6%.
"The banks will likely need some more time before they are comfortable playing in the same sandbox again and who can blame them," Giddis said. "Each day one more bank comes clean that the subprime issue is deeper, wider and hairier than they originally thought or were providing cash for."
Merck & Co. was another sliding Dow component, recently down 0.6%, after the drugmaker's childhood vaccines were recalled on concern they might be contaminated. .
The broader stock indexes also declined, with the S&P 500 falling 7.65 points, or 0.5%, to 1,478.94, and the Nasdaq Composite shedding 18.30 points, or 0.7%, to 2,652.84.
On the New York Mercantile Exchange, crude-oil futures were down $1.99 at $92.40 a barrel, while gold futures dropped $14.8 to finish at $804 an ounce. . .
The dollar, however, gained on the euro, yen and pound. .
And, Treasury prices extended losses, pushing yields up. .
Volume on the New York Stock Exchange hit 996 million and losing stocks outran those advancing almost 3 to 1. On the Nasdaq, more than 1.5 billion shares traded hands, and declining issues ran ahead of advancers more than 2 to 1.
The Fed's aggressive plan announced Wednesday to pump money into the global banking system is not expected to immediately trickle down to the consumer level, experts said. .
"We are not going to see the benefit of what the Fed does this week until sometime later this month," said Paul Nolte, director of investments at Hinsdale Associates. .
Early data included a Labor Department report that the producer price index, which measures inflation at the wholesale level, climbed 3.2% in November, the largest rise in more than three decades.
The rise in producer prices proved "much more than we had expected, and our forecast was well above the consensus," said RBS Greenwich Capital senior economist Michell Girard.
A separate Labor Department report had weekly jobless claims declining, although some economists pointed to an overall upward trend, despite the recent drop. .
In a piece of purely positive data, the Commerce Department said retail sales jumped the most in six months in November, climbing a better-than-expected 1.2% in November, the best gain in six months.
Shares of Lehman Brothers Holdings Inc. , recently off 1.5%, dropped after the banking giant said fourth-quarter profit fell for a third straight quarter in its longest-steak of consecutive quarterly losses since 2002.
Costco Wholesale said fiscal first-quarter profit grew 11%, meeting analyst estimates, while Jos A. Bank Clothiers reported a 29% profit rise and improved margins.
Biogen Idec Inc. shares plunged, recently down 24%, after the biotechnology giant said a search for potential buyers failed to turn up suitors.
And, Moneygram International Inc. confirmed an unsolicited offer from Euronext Worldwide Inc. , but said discussions between the parties broke down and that it's talking to potential investors regarding financing alternatives.
Overseas, European markets declined with bnks under pressure , while Japanese stocks fell sharply
By Kate Gibson