NEW YORK (CNNMoney.com) – Stocks cut losses late in the session Friday, with technology shares leading the way, following a three-session rout that had taken the market to its lowest point since last fall.

The Dow Jones industrial average (INDU) lost 34 points, or 0.3%, with under 30 minutes left in the session, putting the index at 9966. The Dow had fallen as low as 9835 earlier.

The S&P 500 index (SPX) lost 2 points, or 0.3% and the Nasdaq composite (COMP) gained 6 points or 0.3%. All three major indexes were near three-month lows.

Stocks had fallen sharply in the afternoon as worries about a growing debt crisis in Europe exacerbated uncertainty about the U.S. economic outlook. But the market cut losses and even turned higher as the dollar trimmed bigger gains and some of the selling pressure gave way.

“There may be some late-day buying coming in because the market has sold off pretty dramatically over the last few days,” said Haag Sherman, managing director at Salient Partners.

Worries about the Euro zone caused investors to dump riskier assets and plow money into the U.S. dollar and government debt. The greenback rose to a more than 6-month high versus the euro and also gained against the yen. The dollar’s strength then dragged on commodity prices, oil and gold stocks and companies and sectors that have been benefiting from a weaker dollar.

“A lot of the selling that we’re seeing is technical, and it’s all being driven by the dollar,” said Jamie Cox, managing partner at Harris Financial Group.

He said that because there’s a flight to quality into the dollar, it is reversing the carry trade and therefore assets that have been benefiting from a weak dollar are getting hit.

“Most of the sectors getting hit the worst right now are those that are sensitive to a stronger dollar,” he said.

However, he said that the trend was temporary and that once the panic washed out, buyers would move back into riskier assets.

Job losses continue, but rate falls
Debt crisis: Stocks plunged Thursday on worries that rising debt problems in Greece, Portugal and Spain could throw a wrench into any economic recovery in Europe, which would then influence the United States.

The news that the opposition parties defeated the Portuguese government’s austerity plan provided another reminder, if any were needed, that European countries will find it extremely difficult to get a grip on their public finances.

Global markets continued to slide Friday, with Asian and European markets ending lower.

The global jitters overshadowed a U.S. government report that showed moderating U.S. job losses despite an improved unemployment rate.

“The employment report was a mixed bag overall, but the market is more focused on what is happening globally,” said David Rosenberg, chief economist at Gluskin Sheff & Associates.

He said that with heightened concerns over nations’ debt, risk premiums go up and the outlook for the economy and stock market gets cloudier.

Rosenberg said U.S. investors are focused on whether there will be a default or bailout in Greece, and how this will affect the euro and the U.S. dollar. “All of this is going to impact U.S. markets,” he said.

On the move: The strong dollar again dragged on commodity prices, and energy and metal stocks. Energy is one of the biggest sectors in the S&P 500 and the weakness in stocks such as Exxon Mobil (XOM, Fortune 500) and Chevron (CVX, Fortune 500) added to the day’s declines.

Exxon and Chevron are Dow components. Other big blue-chip losers included Boeing (BA, Fortune 500), United Technologies (UTX, Fortune 500), 3M (MMM, Fortune 500) and McDonald’s (MCD, Fortune 500).

Market breadth remained negative, but breadth was improved. On the New York Stock Exchange, losers topped winners by two to one on volume of around 1.15 billion shares. On the Nasdaq, decliners beat advancers seven to six on volume of 2.32 billion shares.

Rally hits a roadblock: The S&P 500 surged 23% in 2009, and 65% after hitting a 12-year low on March 9 of last year. That momentum propelled stocks into the first half of January. But by the second half of the month, the tone had turned more sour and investors had begun to step back.

Between rally highs hit on Jan. 19 and Thursday’s close, the S&P 500 has lost 8%. Analysts say that the market could easily pull back 10% or more — the technical definition of a correction — before staging a recovery.

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