The Dow Jones industrial average, down more than 350 points early in the afternoon, rallied in its final hour Thursday to close out of bear-market territory.
Earlier in the day, the Dow had fallen well below 9,378, the figure that represents a 20 percent drop from its closing high of 11,722.98 on Jan. 14, 2000.
That plunged the blue chip index into a bear market, joining both the Nasdaq and Standard & Poors 500 indexes.
At 3:30 p.m. ET, only half an hour before the final bell, the Dow was down 219.69 to 9,267.31 in heavy trading after having bottomed out at more than 350 points down earlier in the afternoon.
But the Dow finished strong to close down 97.52 at 9,389.48. The Nasdaq closed up 67.47 at 1,897.70, and the S&P; 500 closed down 4.56 at 1117.58. The Russell 2000 index, which tracks the performance of smaller companies stocks, was down 2.94 at 432.80.
The market's early fall followed a new report showing poor employment figures and that the economy has further slowed.
Economic activity fell 0.3 percent in February, according to the Conference Board. The New York-based private research group said its Index of Leading Economic Indicators fell to 108.7 last month after increasing a revised 0.5 percent in January.
The Labor Department reported Thursday that initial applications for jobless benefits edged down by 1,000 to a seasonally adjusted 379,000 for the week ending March 17. Despite the decline, the figures were interpreted as showing a continuing drop in demand for workers.
"This is about a market that is forecasting a recession," said Gary Kaltbaum, a technical analyst at First Union Securities. "I know a lot of people are saying we are not in a recession, but remember 12 months ago people were saying technology was great and wasn't going anywhere but up."
Investors who simply have little incentive to buy sold blue chips on a deepening conviction that a recovery for the economy and corporate earnings is unlikely to take place any time soon.
The market also remains irritated by the interest rate cut the Federal Reserve made Tuesday. Investors, who'd wanted the Fed to reduce rates by 0.75 percentage point, don't think the 0.5 point reduction will be enough to boost earnings and the economy.
Among the blue chips hurting Thursday was Procter & Gamble, down 45 cents at $62.75, after confirming earlier reports that it is slashing 9,600 jobs.
— The Associated Press contributed to this story
