NEW YORK (CNNfn) - The Dow Jones industrial average tumbled more than 180 points Tuesday, as worries that an economic and earnings recovery may take longer than expected sparked an "old economy" selloff.
The tech-heavy Nasdaq composite index didn't fare much better, dropping nearly 2 percent to its lowest close since April 17. Bad news continues to breed fear.
"The earnings numbers continue to be really lousy," said Michael Holland, chairman of Holland & Co. "When you have this kind of carnage, fear replaces greed, but the good news is that this too shall pass."
Tuesday's losses come one day after Dow component 3M warned that earnings in the second half of its year could be hurt by weak sales and a strong dollar. The maker of Scotch tape and Post-it notes posted a lower second-quarter profit that edged past its lowered guidance for the period.
The selling, which started with technology stocks after negative quarterly results from Lucent Technologies and Amazon.com, quickly gained steam by midday and spread to key blue chip stocks such as Alcoa, United Technologies, and International Paper.
The Dow Jones industrial average hit a two-week low, falling 183.30 points to 10,241.12. The Nasdaq composite index shed 29.32 points to 1,959.24, and the S&P 500 slid 19.38 to 1,171.65. It was the third straight session of losses for the major indexes.
The accelerated decline came while Federal Reserve Chairman Alan Greenspan answered questions about the economy and monetary policy from the Senate Banking Committee.
"There have been some late momentum sellers and some (sell) programs. No one is really saying things are looking better," Patrick Boyle, head financial trader with Credit Suisse First Boston, told CNNfn's Street Sweep. "People were hoping that he (Greenspan) might hint to a little more aggressive rate cutting but it didn't happen."
"We've got a bad economic situation, a bad technical situation, so why should the market go up?" said Ken Sheinberg, head of NYSE listed trading with SG Cowen.
Greenspan reiterated his previous stance, given in an appearance before a House panel last week, that the U.S. economy is still weak and may need another interest rate cut to recover. Investors weren't impressed.
"There's an erosion of confidence that any recovery is unlikely to occur as quickly as had been previously expected and when a recovery comes, it's not probable that it's going to be a very robust one," said Bill Meehan, chief market analyst with Cantor Fitzgerald.
Market breadth was negative. Nasdaq losers beat winners 2,399 to 1,285 as 1.6 billion shares changed hands. On the New York Stock Exchange, declining issues beat advancing ones 2,143 to 975 as 1.19 billion shares traded.
"The U.S. economic recovery appears to be further down the road than many expected, so another cut in interest rates is not likely to mean a great deal," said Alan Ackerman, senior vice president with Fahnestock & Co. "What's more important is when companies report they're starting to see a reduction in inventories."
In other stock markets, Europe's fell while Asia's were mixed. The dollar slipped against the euro and the yen. Treasury securities were flat.
Manufacturing issues add to downturn
While technology companies caused the session to start lower, it was the manufacturing issues that kept driving it in a negative direction.
3M (MMM: down $4.26 to $107.06, Research, Estimates), Alcoa (AA: down $2.32 to $37.23, Research, Estimates), United Technologies (UTX: down $1.53 to $73.87, Research, Estimates), and International Paper (IP: down $1.45 to $38.07, Research, Estimates) led the Dow industrials' slide.
"The on-again, off-again love affair with cyclical stocks is indicative of a lack of clarity," Meehan said.
But it was tech issues that set the tone. As quarterly financial results continue to come out, the outlooks of the companies reporting have investors jittery.
"Many are beating lowered expectations, but no one is saying anything good about the future," said Art Hogan, chief market analyst with Jefferies & Co.
Analysts say this negative sentiment is keeping cash on the sidelines. "Investors feel uncomfortable about the visibility ahead," Fahnestock's Ackerman said.
Late Monday, Amazon.com (AMZN: down $3.97 to $12.06, Research, Estimates) reported sales shy of forecasts and warned of more pressure in the coming months as it seeks to meet its deadline of operating profitability in the fourth quarter. The guidance came as the online retailer posted a narrower second-quarter loss that was better than Wall Street expectations.
Lucent Technologies (LU: down $1.47 to $6.43, Research, Estimates) reported a wider-than-expected loss for the latest quarter as revenue also badly missed targets. The troubled telecom equipment maker said it will cut another 15,000-to-20,000 jobs and take a huge new restructuring charge.
Within the same sector, mobile communications technology company Qualcomm (QCOM: down $3.10 to $57.75, Research, Estimates) said Tuesday it is scrapping plans to spin off its semiconductor business, and also announced a business realignment and management shake-up, replacing Chief Operating Officer Richard Sulpizio.
Telecom service provider Qwest Communications (Q: down $1.50 to $27.05, Research, Estimates) said its second-quarter profit tumbled 50 percent, matching forecasts on Wall Street.
Oil issues come up dry
Shares of two of the biggest U.S. oil companies fell amid mixed second-quarter results. Exxon Mobil (XOM: down $1.53 to $40.97, Research, Estimates), the No. 1 U.S. oil company, fell short of analyst expectations but posted stronger second-quarter earnings than a year earlier, while Chevron (CHV: down $2.46 to $85.18, Research, Estimates) topped earnings estimates but saw its quarterly revenue drop.
Specialty chipmakers Cirrus Logic (CRUS: down $5.64 to $18.39, Research, Estimates) and Altera (ALTR: down $1.23 to $27.53, Research, Estimates) both slid on negative current quarter forecasts. Cirrus expects a loss of 15-to-20 cents a share in the fiscal second quarter, and Altera said its third-quarter sales will decline by 15 percent-to-20 percent.
Shares of Gillette (G: down $1.16 to $28.20, Research, Estimates) were down after buyout firm Kohlberg Kravis Roberts & Co. said Monday it would sell about 41 million shares of the consumer products company, or about 80 percent of its holdings.
Offering investors some respite from the negative news, a few companies showed strength on the heels of their quarterly results announcements.
Diversified manufacturer Honeywell International (HON: up $0.04 to $36.21, Research, Estimates) posted lower operating earnings that were slightly better than Wall Street expectations, with the company giving a full-year earnings range that included current forecasts.
Texas Instruments (TXN: down $0.60 to $30.20, Research, Estimates), the semiconductor maker, reported second-quarter earnings that topped expectations. But it warned of weak sales and a loss for the current quarter.
McDonald's (MCD: up $0.62 to $28.39, Research, Estimates) reported second-quarter earnings of 34 cents, in line with expectations but down from 39 cents a year earlier. The restaurant chain reiterated its outlook for the second half of the year but said it may close some of its underperforming restaurants.
In other corporate news, Microsoft's (MSFT: down $0.77 to $66.32, Research, Estimates) effort to get its new Windows XP operating system out by October apparently faces opposition from Sen. Charles Schumer (D-N.Y.). Schumer said he will call for congressional hearings into the software maker's "anticompetitive practices." 
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SECOND-QUARTER REVIEW
