Stocks fell on Wednesday after a surprising contraction in an index of Midwest business activity, but buying of technology bellwethers like Cisco Systems Inc at the end of a strong quarter limited losses.

The top drags in Wednesday's session were some of the quarter's best performers, including industrials, materials and banks.

The Institute for Supply Management-Chicago's business barometer unexpectedly fell to 46.1 in September, a level that indicates contraction in the regional economy.

The Chicago PMI kind of scared people, given how much below expectations it was and that turned the market south, said Owen Fitzpatrick, head of U.S. Equity Group at Deutsche Bank Private Wealth Management in New York.

In general, even though economic numbers in the last two or three weeks have been mixed just like today, I think we're still headed toward an economic recovery.

Typical of quarter-end action, trading was choppy and volume light.

The Dow Jones industrial average <.DJI> slipped 29.92 points, or 0.31 percent, to 9,712.28. The Standard & Poor's 500 Index <.SPX> fell 3.53 points, or 0.33 percent, to 1,057.08. The Nasdaq Composite Index <.IXIC> shed 1.62 points, or 0.08 percent, to 2,122.42.

After the closing bell, shares of Bank of America rose 1.4 percent to $17.16 after the company announced the retirement of Chief Executive Ken Lewis. The company does not have a successor at this time. In regular trading, Bank of America's stock ended at $16.92, down 1.4 percent on the New York Stock Exchange.

In other extended-hours trading, Penske Automotive Group Inc's
shares tumbled 8.9 percent to $17.47 after the company said it had terminated talks with General Motors Co to buy the Saturn brand.

DOW'S BEST QUARTER IN OVER A DECADE

Even so, the Dow -- up 15 percent this quarter -- marked its best quarterly performance since the fourth quarter of 1998, while the S&P 500 notched its second straight quarterly advance of 15 percent. The Nasdaq gained 15.7 percent for the third quarter.

For the month, the Dow rose 2.3 percent, the S&P 500 added 3.6 percent and the Nasdaq climbed 5.6 percent. These monthly gains ran counter to the historic trends showing September to be a miserable month for U.S. stock market.

After a weak open, the indexes briefly turned positive by mid-afternoon, thanks to gains in the shares of such tech bellwethers as Cisco Systems Inc and International Business Machines Corp .

Cisco shares rose 1.03 percent to $23.54 on Nasdaq, while IBM shares climbed 0.7 percent to $119.61. The semiconductor index <.SOXX> gained 0.9 percent.

When you look across the 10 (S&P 500's industry) sectors, technology is one sector where there's actually some topline growth, said Fitzpatrick.

But JPMorgan declined 2.4 percent to $43.82, putting the stock among the Dow's worst performers, along with Boeing Co , down almost 1 percent to $54.15 and United Technologies Corp , off 0.6 percent at $60.93.

Alcoa Inc shed 1.4 percent to $13.12 as investors booked profits following this quarter's jump in commodity prices.

Shares of Exxon Mobil Corp ended down 0.7 percent at $68.61 as investors fretted about crude oil's recent climb on industry refining margins. U.S. front-month crude rose $3.90, or 5.85 percent, to settle at $70.61 a barrel.

The Chicago PMI report added to the recent string of some surprisingly weak economic indicators, including Tuesday's disappointing report on September consumer confidence.

It also eclipsed a Commerce Department report that showed the economy, measured by GDP, contracted more slowly than initially thought in the second quarter.

Even so, the benchmark S&P 500 stayed on course to end the quarter and September, a traditionally sour month for stocks, on a higher note. For 2009, the S&P is up 17 percent and from a 12-year closing low in early March, it's up nearly 60 percent.

Volume was heavy on the New York Stock Exchange, where about 1.77 billion shares changed hands, above last year's estimated daily average of 1.49 billion. On the Nasdaq, about 2.75 billion shares traded, above last year's daily average of 2.28 billion.

Declining shares outnumbered advancing ones by a ratio of about 3 to 2 on the NYSE, while on the Nasdaq, more than eight stocks fell for every five that rose.

(Editing by Jan Paschal)