Stocks fall as investors shun risk

Data showing unexpected strength in U.S. manufacturing helped the three major U.S. stock indexes end off their worst levels of the day. But disappointing profit outlooks from Ciena Corp. (NasdaqGS: - ), a communications equipment maker, and Constellation Brands Inc. (NYSE: - ), a beverage company, added to the downward bias.

Trading during the session was choppy, causing the Dow to slip in and out of positive territory. The swing in the Dow was about 230 points from its session low to its high for the day.

Risk-taking fell out of favor as the yen's climb raised concern that investors were being forced to unwind trades based on borrowing at Japan's low interest rates.

"People are going to run where it's safe," said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey. "The sell-off this morning was pretty vicious, so it's encouraging to see that things came back."

The Dow Jones industrial average (DJI: - ) fell 34.29 points, or 0.28 percent, to end at 12,234.34. The Standard & Poor's 500 Index ( - ) slipped 3.65 points, or 0.26 percent, to 1,403.17. The Nasdaq Composite Index (Nasdaq: - ) dropped 11.94 points, or 0.49 percent, to 2,404.21.

After the bell, shares of Dell Inc. (NasdaqGS: - ) dropped 1.6 percent to $22.65 in electronic trading after the world's second-largest personal computer maker posted quarterly revenue that fell short of expectations.

During regular trading, Ciena shares dropped 10.1 percent, or $3.19, to $28.28 on the Nasdaq, while Constellation shares fell 14.5 percent, or $3.40, to $20.06 on the New York Stock Exchange. Earlier in the session, Constellation hit a 52-week low at $19.35. It was the NYSE's biggest percentage loser.

Reflecting investors' flight to quality and the relative safety of government bonds, the benchmark 10-year U.S. Treasury note (US10YT=RR) was up 5/32 in price at 100-17/32, while its yield slipped to 4.56 percent from 4.57 percent late on Wednesday.

SUDDENLY, UTILITY STOCKS LOOK GOOD

In the stock market, investors also gravitated to sectors, including utilities, that they believe are better positioned to withstand moderation of economic growth.

Shares of Edison International (NYSE: - ) gained 1.41 percent, or 66 cents, to $47.58, a day after the utility company reported a stronger-than-expected profit. The S&P utilities index ( - ) ended up 0.3 percent.

In the first few minutes of trading, the Dow industrials slid 209 points.

But data showing unexpected strength in a gauge of U.S. manufacturing inspired investors to scour the market for beaten-down shares and that buying helped the stock indexes pare losses.

The Institute for Supply Management said its index of national factory activity rose to 52.3 from 49.3 in January, above economists' median forecast for a slight rise to 50.0.

A reading above 50 indicates growth in the sector.

Even so, shares of United Technologies declined 0.8 percent, or 51 cents, to $65.12 on the NYSE, while shares of Caterpillar fell 0.8 percent, or 52 cents, to $63.90, both on the NYSE.

Investors are worried about the exposure of some big manufacturers to China, where a 9 percent drop in the benchmark Shanghai stock index on Tuesday helped set off a global sell-off in stocks and fanned concerns about a global slowdown in economic growth.

On the upside, Citigroup Inc. (NYSE: - ) supported both the Dow and the S&P 500 as the stock, among those most severely punished in Tuesday's plunge, suddenly looked attractive to investors seeking to increase their exposure to dividend-paying stocks.

Citigroup, the largest U.S. banking company, offers a dividend yield of 4.29 percent, which could lure some buyers away from U.S. Treasury bonds. The stock finished up 1.4 percent, or 68 cents, at $51.08 on the NYSE.

Volume was heavy on the NYSE, where about 2.23 billion shares changed hands, above last year's estimated daily average volume of 1.84 billion. On the Nasdaq, about 2.82 billion shares were traded, above last year's daily average of 2.02 billion.

Decliners outnumbered advancers by a ratio of about 8 to 5 and on the Nasdaq, about two stocks fell for every one that rose.