(Reuters) - The S&P 500 and Dow industrials ended slightly negative but well above their session lows in volatile trading on Thursday as the arrest of a Chinese technology executive fanned fears of U.S-China tensions over trade, while some beaten-up big technology and internet shares posted gains.

Following a rare midweek U.S. trading holiday, stocks tumbled at the outset of the trading, with the benchmark S&P 500 dropping as much as 2.9 percent. But from midday stocks began paring their losses and the tech-heavy Nasdaq ended in positive territory.

“The market had gotten way oversold,” said Gary Bradshaw, senior vice president and portfolio manager at Hodges Capital Management in Dallas. “Investors looked up and saw they could buy good companies at much cheaper valuations than they could a couple of months ago.”

The initial selling followed news that the chief financial officer of telecom equipment maker Huawei Technologies had been arrested in Canada and faced extradition to the United States.

The arrest came as investor enthusiasm had already faded following a truce reached over the weekend in talks between the United States and China, which had prompted some hope about resolving differences over trade that have clouded the stock market’s outlook this year.

“You have got the news overnight of the arrest of the CFO of Huawei that I think is throwing a real monkey wrench into the positive optimism that surrounded the weekend meeting,” said Katie Nixon, chief investment officer for the wealth management division of Northern Trust in Chicago.

Stocks seemed to gain further support from a report in the Wall Street Journal that Federal Reserve officials are considering whether to signal a new wait-and-see mentality after a likely interest-rate increase at their meeting in December.

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The Dow Jones Industrial Average .DJI fell 79.4 points, or 0.32 percent, to 24,947.67, the S&P 500 .SPX lost 4.11 points, or 0.15 percent, to 2,695.95 and the Nasdaq Composite .IXIC added 29.83 points, or 0.42 percent, to 7,188.26.

Aside from trade, concerns over bond yields and interest rates have pressured the stock market in recent days.

U.S. Treasury yields fell on Thursday, with 10-year yields hitting three-month lows, as traders scaled back expectations on the number of rate hikes the Fed would implement amid weakening economic data and market volatility.

Financial shares .SPSY, which are sensitive to bond yield swings, fell 1.4 percent.

The energy sector .SPNY slumped 1.8 percent and was the worst performing group, as oil fell after OPEC and allied exporting countries ended a meeting without announcing a decision to cut crude output.

Losses for the S&P 500 were mitigated by gains for Amazon AMZN.O, Netflix NFLX.O and some of the other technology and internet stocks that have been hit particularly hard during the market's pullback in recent months.

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The major indexes fell more than 3 percent each on Tuesday. Markets were closed on Wednesday for a day of mourning for former President George H.W. Bush, who died on Friday.

About 10.5 billion shares changed hands in U.S. exchanges, well above the 7.9 billion daily average over the last 20 sessions.

Declining issues outnumbered advancing ones on the NYSE by a 1.75-to-1 ratio; on Nasdaq, a 1.61-to-1 ratio favored decliners.

The S&P 500 posted 14 new 52-week highs and 70 new lows; the Nasdaq Composite recorded nine new highs and 376 new lows.