Techs Lead Decline After Fed Rally Fizzles

Technology stocks led the market lower as a morning rally inspired by the Federal Reserve plan to support consumer lending fizzled.

Traders were cautious after the best two-day rally in more than 20 years and worries about the economy drove a sell-off in big-cap techs.

The Dow Jones Industrial Average and  S&P 500 index lost more than 1 percent. The tech-heavy Nasdaq skidded more than 2 percent.

Research In Motion fell 10 percent, while Microsoft lost more than 4 percent and Apple fell more than 3 percent.

The Fed announced another major effort to triage the U.S. financial system: a $600 billion program to buy mortgage-related debt and securities and a $200 billion facility to buy consumer debt securities.

Meanwhile, President-elect Obama was back in front of the camera today with a fresh effort to calm the markets, announcing his budget officials and promising to cut spending to offset the costs of stimulus efforts.

The day's economic news was mixed: GDP was revised to show the economy shrunk 0.5 percent in the third quarter from the prior estimate of a 0.3-percent contraction, in-line with economists' expectations. This was the second of three readings on Q3 GDP. A gauge of consumer confidence improved in November, while home prices plunged by a record 17.4 percent in September.

A government bailout for Citigroup and clarity on the incoming government's economic team brought the Dow another 400-point gain, bringing its two-day total to just shy of 900 points. It was the best two-day performance by the market since the rebound after the 1987 crash. Despite the rally, many investors remained wary of further weakness to come.

"We've been testing these so-called lows the last three weeks and we've broken through them," Rob Morgan, market strategist from Clermont Wealth Strategies, told CNBC. Morgan expects recent lows to be retested, but that could point to further strength if they hold, he said. 

Citigroup shares rose again, trading above $6 a share, after clawing back most of its losses on Monday following news that the government plans to guarantee over $300 billion of the bank's troubled assets and inject $20 billion from the TARP. 

One investor welcoming the government intervention and stock turnaround was Saudi Prince Alwaleed bin Talal, who is building a 5 percent stake in Citi and told CNBC he has "full confidence" in the group's CEO Vikram Pandit.

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Fears of rising unemployment couldn't be forgotten as reports of more layoff kept coming.

Internet search giant Google is expected to slash the number of contract workers it uses, according to a report from the Wall Street Journal, while ArcelorMittal warned of layoffs. Google shares bounced.

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On the earnings front, DR Horton posted earnings before the bell that reflected a wider quarterly loss of $2.53 per share, or $799.9 million, compared with 16 cents per share, or $50.1 million, a year ago.

Dollar Tree reported its profit jumped 20 percent, topping forecasts, as consumers flocked to staples like food and cleaning supplies. The dollar-store chain also benefitted from more consumers trading down from more expensive goods and stores.

Still to Come:

WEDNESDAY: Weekly mortgage applications; durable-goods orders; weekly jobless claims; personal income/spending; Chicago PMI; Reuters/U. of Mich. consumer sentiment; new-home sales; weekly oil and natural-gas inventories; Earnings from Deere, Tiffany
THURSDAY: All financial markets closed for the Thanksgiving holiday
FRIDAY: NYSE closes at 1pm

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