"It was too much, too soon," Hugh Johnson, chief investment offer for First Albany Corp., said of Wednesday's rally. "There is a message that has been coming for a long time, and that is economists and strategists are too optimistic about the outlook for the economy and earnings. The recovery is not going to come as soon as they expect, or be as strong as they expect. ... The market has gone down to reflect that."

Investors had first believed that earnings would recover in the first quarter and now their hopes for the second quarter are diminishing. Johnson said a third-quarter recovery could also prove to be more premature, optimistic thinking.

The Dow Jones industrial average closed down 97.50, or 1.0 percent, at 9,939.92, according to preliminary calculations. After two days of selling, the Dow kept about a third, or 103.37, of its 305.28-point gain from Wednesday.

The broader market also declined for the second straight day, giving up a greater portion of its advance from Wednesday. The Nasdaq composite index fell 49.62, or 3.0 percent, to 1,600.87. The Nasdaq lost all but 27.05 of the 122.47 it surged on Wednesday.

The Standard & Poor's 500 index declined 18.02, or 1.7 percent, to 1,054.99. After two days of selling, the S&P was left with 5.50 points of the 39.36 gained Wednesday.

Selling has dominated Wall Street for weeks, with investors unloading shares based on companies' inability to reassure them that business is improving and profits are strengthening.

Meanwhile, rallies have been short-lived rebounds because investors see little reason ­ other than occasional bargain hunting ­ to buy stocks.

Wednesday's rally was an aberration, and investors "kind of went overboard," said Stephen Carl, principal and head of equity trading at The Williams Capital Group.

"What you have to see is continually good economic numbers, which we aren't seeing, and more positive corporate earnings, which we don't have. Until that happens on a consistent basis, people are really hesitant to jump in," Carl said.

Among today's losers, Cisco Systems fell 33 cents to $15.42. The network equipment maker's better-than-expected earnings, released late Tuesday, were the catalyst for Wednesday's rally.

While positive earnings reports from tech companies have the most sway with investors, the sector has been on a steady decline all year, as it is expected to be the last to emerge from recession. Year-to-date, the Nasdaq has tumbled 17.9 percent.

Other tech losers today included Dell Computer, falling $1.36 to $23.88, Texas Instruments, stumbling $1.09 to $28.70, and Intel, declining $1.23 to $27.01.

Investors also pulled out of blue chips, despite the stocks' reputation for safety in bearish markets. Wal-Mart fell $1.33 to $53.66, Caterpillar retreated $1.05 to $52.81, and Citigroup stumbled $1.03 to $43.30.