NEW YORK (AP) — Wall Street turned cautious today after a two-day rally and as downbeat corporate news reminded investors that the economy's troubles won't soon ease.

The Dow Jones industrials fell nearly 225 points, while broader indexes showed more moderate declines.

Investors worry that companies' difficulties could make an economic turnaround difficult. FedEx Corp. cut its forecast for fiscal 2009 earnings and capital spending late Monday as the slumping economy eroded package deliveries.

But in a sign that the market is still willing to place some bets on an eventual recovery in the economy, companies that make microchips saw some buying today despite a disappointing forecast from Texas Instruments Inc. Some investors are anxious that they could miss a market bottom when defensive names like consumer goods companies likely would lag somewhat riskier bets like tech stocks.

The market's pullback wasn't a surprise given the steep advance of the past two sessions. But the reasons for the selling weren't simply based on two days of gains, analysts said. Wall Street is still trying to determine how badly companies' woes will dent profits and how soon President-elect Barack Obama's plan to introdcue a flood of public works spending could aid the economy.

"The markets are just expressing a tremendous amount of ambivalence about the future," said Marian Kessler, co-portfolio manager of the Becker Value Equity Fund in Portland, Ore. "The market is grappling with what is certainly going to be a fairly deep recession in 2009."

Investors' anxiety about the struggling economy has recently been accompanied by some hopes that market might be carving a bottom. Since reaching multiyear trading lows in late November, the Dow has risen about 20 percent and the broader Standard & Poor's 500 index has risen about 23 percent. And on Friday and Monday, the Dow logged a two-day rally of 560 points.

Those gains came as the market tried to look at how the economy might be faring next year. Typically, Wall Street looks six to nine months ahead.

"The economic news still stinks ... but what's going on is that people are no longer looking at the present. They're looking at the future," said Alfred E. Goldman, chief market strategist at Wachovia Securities in St. Louis. "They're beginning to assess that all the dramatic fiscal and monetary stimulus already on the table and more to come will turn this economic around maybe next summer."

Still, when it comes to a potential stock market rebound, "it's not going to be a one-way trip," Goldman said. "We still have a ton of dismal news, and so much technical and emotional damage done, that investor confidence is going to come back slowly, not quickly."

That caution means like volatility is likley to continue, observers said.

In midafternoon trading, the Dow Jones industrial average fell 221.66, or 2.48 percent, to 8,712.52.

Broader stock indicators also declined. The Standard & Poor's 500 index fell 18.27, or 2.01 percent, to 891.43. The Nasdaq composite index fell 18.93, or 1.20 percent, to 1,552.81.

The Russell 2000 index of smaller companies fell 12.30, or 2.56 percent, to 469.08.

Declining outnumbered advancers by 2 to 1 on the New York Stock Exchange, where volume came to 801.1 million shares.

Bond prices rose as stocks fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.64 percent from 2.74 percent late Monday. The yield on the three-month T-bill, considered one of the safest investments, held steady at 0.01 percent, indicating a high degree of investor uneasiness.

The dollar rose against most other major currencies, while gold prices slipped.

Oil prices fell even amid investor expectations that OPEC will announce a big production cut next week to curb crude's stunning 70 percent-free-fall over the past five months. Light, sweet crude fell 30 cents to $43.31 a barrel on the New York Mercantile Exchange.

Wall Street is waiting for lawmakers to finish negotiating a $15 billion bailout for General Motors Corp. and Chrysler LLC. A deal, which might occur as early as Wednesday, reportedly would give the government an ownership stake in the automakers. The market has been concerned that a collapse of GM, Chrysler or Ford Motor Co. would trigger massive job losses, and further stymie the government's efforts to lift the U.S. out of a recession.

GM fell 23 cents, or 4.7 percent, to $4.70, while Ford fell 19 cents, or 5.6 percent, to $3.19. Chrysler LLC isn't publicly traded.

FedEx fell $11.54, or 16 percent, to $62.89 after its announcement, while Texas Instruments rose 58 cents, or 3.9 percent, to $15.40.

And electronics maker Sony Corp. said it is slashing 8,000 jobs, or 4 percent of its global work force, to cut costs by $1.1 billion a year as the worldwide downturn batters profits. Sony rose 50 cents, or 2.5 percent, to $20.54.

In economic news, the National Association of Realtors said its October index of pending home sales slipped, but by less than economists anticipated.

Stock markets were mixed overseas. Hong Kong's Hang Seng index closed down 1.94 percent after a big surge on Monday, while Japan's Nikkei 225 added 0.80 percent. Major European bourses rose. Britain's FTSE-100 added 1.89 percent, Germany's DAX advanced 1.34 percent, and France's CAC-40 rose 1.55 percent.