By Kristina Cooke NEW YORK (Reuters) - U.S. stocks fell on Wednesday as a big rally faltered in the last minutes of trading on worry about the weakening corporate profit picture after a news report raised questions about General Electric's earnings outlook. In a move that has been the trademark of the market's volatility ever since Lehman Brothers' bankruptcy filing in mid-September, the Dow plunged more than 300 points in the last 12 minutes, dashing prospects for the first back-to-back gains in a month. Aside from the GE news, reported by Dow Jones with less than 15 minutes left in the session, traders said hedge funds and mutual funds were dumping stocks to raise cash to repay clients and lenders, while other investors were eager to lock in some profit from Tuesday's huge rally. General Electric's stock fell 4 percent in the last minutes of trading, only to end down 1.5 percent at $19.20. Dow Jones reported that General Electric's Chief Executive Jeffrey Immelt said GE aims at keeping 2009 profits at the same level as this year, even if revenue drops 10 percent to 15 percent. But after the closing bell, Dow Jones corrected their story, saying that GE Chief Executive Jeff Immelt had not forecast 2009 profit to be flat. The news service said Immelt had been speaking hypothetically when he told a business group in Spain that he would ask his managers to maintain profits even if revenues at their businesses fell as much as 10 percent to 15 percent. "People are blaming Immelt for this last-minute drop," said Eric Kuby, chief investment officer at North Star Investment Management Corp in Chicago. "But it's also what we've been seeing for the past few weeks -- the end-of-day hedge and mutual fund liquidations." Trading was volatile after the Federal Reserve slashed interest rates by half a percentage point, the latest in the series of moves to keep the credit crisis from triggering a deep recession. Some traders had been speculating there would be a deeper cut. The Dow Jones industrial average fell 74.16 points, or 0.82 percent, to close at 8,990.96. The Standard & Poor's 500 Index declined 10.42 points, or 1.11 percent, to 930.09. But the Nasdaq Composite Index rose 7.74 points, or 0.47 percent, to 1,657.21. In contrast, at about 3:30 p.m. EDT, all three indexes were rallying near session highs: The Dow was up over 230 points, or about 2.6 percent, at 9,299 and the S&P 500 was up over 20 points, or about 2.6 percent, at 964, while the Nasdaq was up about 46 points, or about 2.8 percent, at 1,695. By 3:58 p.m., the rally was over, with both the Dow and the S&P turning negative. Health-care company Johnson & Johnson, down 4.1 percent at $61.53, was the top drag on the Dow after J.P. Morgan Securities downgraded the stock. But there were some bright spots. The costs for banks to borrow dollars from each other over three months fell for a 14th straight day, suggesting that confidence was returning in the credit markets. GM shares rose 8.2 percent to $6.76 after sources familiar with the matter told Reuters that General Motors and private equity firm Cerberus Capital Management have resolved "major issues" in a proposed GM-Chrysler merger. Shares of energy companies headed higher as U.S. front-month crude gained $4.77 to settle at $67.50 a barrel. An S&P index of energy stocks rose 2.26 percent. Boeing climbed 1.8 percent to $49.80, making it one of the Dow's top advancers, after government data showed surging demand for aircraft drove an unexpected increase in September for new orders for long-lasting manufactured goods, also known as durable goods. The Nasdaq got its biggest lift from Apple Inc, up 4.6 percent at $104.55, after a Sanford Bernstein analyst said the maker of iPhones, Mac computers and iPods is in an excellent position to launch a "substantial" stock-buyback program. Trading was moderate on the New York Stock Exchange, with about 1.62 billion shares changing hands, below last year's estimated daily average of roughly 1.90 billion, while on Nasdaq, about 2.79 billion shares traded, above last year's daily average of 2.17 billion. Advancing stocks outnumbered declining ones on the NYSE by nearly 2 to 1 and on the Nasdaq, by about 4 to 3. (Reporting by Kristina Cooke; Editing by Jan Paschal and Carol Bishopric)

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