NEW YORK (CNNfn) - Wall Street recouped most of its losses in the last hour of trading Tuesday as bargain hunters mostly viewed a profit warning from wireless equipment maker Nokia as company-specific.
"The market is looking at the glass half-full and thinking the Nokia news is somewhat isolated," said Peter Coolidge, senior trader with Brean Murray & Co.
The Dow Jones industrial average rebounded from a 133-point loss to carve out a modest gain, while the Nasdaq composite index reversed a 66-point slide and the S&P 500 erased its earlier 19-point loss.
"We've been down all day largely on the Nokia earnings warning," said Stephen Carl, principal and head of equity trading at Williams Capital Group. "There was some bottom fishing after two down days and maybe some short covering."
Charles Payne, president of Wall Street Strategies, also noted that the selling was due to disappointment over Nokia's announcement rather than panic, which bodes well for stock prices in the coming months.
"Disappointment can go away faster than the panic," Payne said.
The Nasdaq composite index fell a modest 0.83 points to 2,169.95 while the Dow Jones industrial average erased earlier losses to gain 26.29 points to close at 10,948.38. The S&P 500 advanced 1.46 to 1,255.85.
With Nokia as the only major news in the session, sentiment shifted from a "glass half-empty" to "glass half-full" approach. Analysts said this scenario will likely continue.
"The problem for the next seven weeks will be this tug-of-war," Alan Hoffman, stock market strategist with Value Line Asset Management, told CNNfn's Street Sweep. "Until we start seeing earnings taking off, I don't think we're going to go anywhere but that says there's interest in buying."
And David Briggs, head of equity trading at Federated Investors, described the flip into positive territory as "more schizophrenia."
"I think the market is getting ready for a little trading buy," he told CNNfn's Street Sweep. "We're due for a little bit of a bounce back from the lower end of the trading range."
Some of the late buying was also attributed to Friday's "triple witching" options expiration. Triple witching is the quarterly expiration of futures, index options, and individual stock options that happen within the same day.
Many of these positions can be closed out ahead of the actual expiration day, which was adding to the late-day volatility.
"I think it's triple witching activity," said Ken Sheinberg, head of listed trading at SG Cowen. "The move has been pretty impressive but the liquidity has been horrendous so it doesn't take a lot to move this market. There was a rather large asset allocation and when that got through, you had a lot of short covering and bottom fishing that just fed on itself."
Market breadth was mixed. Nasdaq losers beat winners 2,040 to 1,736 as 1.71 billion shares traded. Advancing issues on the New York Stock Exchange nudged out declining ones 1,572 to 1,526 as 1.13 billion shares traded.
In other markets, Treasury securities rose. The dollar slipped against the euro but was little changed versus the yen.
Dow bounces back
Aside from Nokia, Tuesday's selling was also partly due to investors getting ahead of themselves by betting that all the bad news already was factored into stock prices.
Throughout April and May, it was this sentiment that injected life into the major indexes. In those two months, the Dow gained 10.4 percent, the Nasdaq jumped 14.7 percent, and the S&P advanced 8.2 percent.
"Stocks rallied pretty good and they rallied, in part, on the belief that this quarter would bail us out – and we know that's not the case," said Payne. "But this market still wants to trade higher – even though investors have gotten ahead of themselves, they're still buyers if given the right catalyst."
Lifting the Dow higher were shares of Boeing (BA: up $1.21 to $65.71, Research, Estimates), Procter & Gamble (PG: up $1.15 to $65.50, Research, Estimates) and 3M (MMM: up $1.74 to $122.08, Research, Estimates).
But keeping pressure on the Dow were shares of Honeywell International (HON: down $1.78 to $43.47, Research, Estimates), after European antitrust regulators indicated they want General Electric (GE: up $1.37 to $48.77, Research, Estimates) to shed more than half of Honeywell's aerospace division, according to the Wall Street Journal.
Also hurting the Dow was Alcoa (AA: down $1.64 to $40.50, Research, Estimates), the world's largest aluminum producer, which tumbled after Sanford Bernstein cut its rating to "market perform" from "outperform."
Nokia weighs on techs
Investors looking for some positive guidance were sorely disappointed as Nokia's warning prompted investors to question when the overall economic and earnings picture would truly improve.
"The recovery is going to take longer than anyone initially hoped for, and (Nokia) is the biggest name to warn so far," Payne said. "I think it was wishful thinking that the turn would happen overnight. But it's not a bad assumption to believe that things are going to get better – it just takes time and maybe investors haven't been realistic."
Most analysts expect more churning as the pace of near-term corporate guidance increases.
"This is the wakeup call," James Awad, money manager with Awad Asset Management, told CNNfn's Before Hours. "We're going to go through a test here where we're going to have a period of turbulence in the market as we report second-quarter earnings and get forward-looking guidance for the third quarter."
Nokia (NOK: down $5.45 to $23.26, Research, Estimates) said slower-than-expected market growth would lead to second-quarter earnings per share of only  0.15-to-0.17, compared with earlier expectations of 0.20.
Other wireless companies that followed Nokia lower included Western Wireless (WWCA: down $0.23 to $40.48, Research, Estimates) and Motorola (MOT: down $0.86 to $14.00, Research, Estimates). Qualcomm (QCOM: down $1.81 to $57.97, Research, Estimates), which makes chips for wireless communications equipment, also took it on the chin.
But the selling wasn't confined to wireless stocks. All sectors were under pressure. In the biotech space, a warning from Affymetrix (AFFX: down $14.94 to $26.01, Research, Estimates) sent shares plunging.
Affymetrix said its second-quarter revenue would reach only $44 million- to-$50 million, versus First Call estimates of $57 million, and also said business may be sporadic over the next few quarters.
Merrill Lynch cut its intermediate-term rating on Affymetrix to "neutral" from "accumulate," but maintained its long-term "buy" rating based on the belief that the current softness in sales would eventually correct itself.
Other biotechs that faltered included Genentech (DNA: down $0.60 to $52.40, Research, Estimates) and Human Genome Sciences (GENE: down $0.93 to $12.12, Research, Estimates).
But Amgen (AMGN: up $0.17 to $66.92, Research, Estimates) and Biogen (BGEN: up $1.45 to $64.97, Research, Estimates) bucked the trend. 
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