NEW YORK (CNNmoney) - A big slide in Microsoft helped hand the Nasdaq composite index its first loss in six sessions Tuesday after the software maker suffered a setback in its antitrust case.
But the losses spread beyond Microsoft, as U.S. retaliatory strikes against Afghanistan targets entered a third day and investors braced for hundreds of dismal corporate financial reports.
"Investors are focused on what's happening in the Mideast and at home," Jeffrey Benton, specialist with Performance Specialist Group, told CNNfn's Market Call. "There's no one theme here. But all in all, we're not disappointed that the market seems to be holding pretty well."
Shares of Motorola, which have fallen as much as 61 percent in the past 52 weeks, slid ahead of the company's quarterly results due after the close of trading.
The mobile phone maker is among the companies expected to lose money in the July-September quarter, a period of rising layoffs, slowing spending and a crippling terrorist attack against the United States.
The Dow Jones industrial average also fell Tuesday. But the major indexes, which rallied over the last two weeks, are still above the year's worst levels reached a week after the Sept. 11 attack.
"It's a real tribute in these times that we don't sell off harder," Linda Jay, NYSE trader at LaBranche & Co, told CNNfn.
The Nasdaq composite index fell 35.78 points, or 2.2 percent, to 1,570.17, while the Dow Jones industrial average lost 15.50 to 9,052.44. The Standard & Poor's 500 index fell 5.69 to 1,056.75.
More stocks fell than rose. On the New York Stock Exchange, decliners beat advancers by an 8-to-7 margin as 1.1 billion shares traded. Nasdaq losers topped winners by about a 3-to-2 edge as 1.5 billion shares changed hands.
In other markets, Treasury securities fell. The dollar rose against the euro and yen.
Setback
The Supreme Court Tuesday rejected Microsoft's (MSFT: down $3.48 to $54.56, Research, Estimates) request to overturn an earlier ruling that the software maker violated U.S. antitrust laws, causing a slide in the company's stock.
Also in the software sector, e-business specialist Commerce One (CMRC: down $0.24 to $2.57, Research, Estimates) said its third-quarter earnings and revenue would miss Wall Street estimates.
Chip stocks fell after Merrill Lynch, Goldman Sachs and Credit Suisse First Boston all made cautious comments on the semiconductor business.
Intel (INTC: down $0.79 to $21.45, Research, Estimates), Broadcom (BRCM: down $0.99 to $25.76, Research, Estimates) and Texas Instruments (TXN: down $1.94 to $26.81, Research, Estimates) all fell amid downbeat comments.
"We continue to forecast a 35-40 percent decline in 2001 semiconductor capital spending," Merrill said.
But chipmaker Microchip Technologies (MCHP: down $1.14 to $27.86, Research, Estimates) served up promising news, saying second-quarter earnings will come in at the upper end of estimates.
Motorola (MOT: down $0.67 to $16.72, Research, Estimates) is among the first major companies to report results for the third quarter after the close. The mobile phone maker is expected to post a loss of 7 cents a share, a big turnaround from the 26-cent-per-share profit in the year-earlier period.
Outside technology, Toys "R" Us (TOY: up $0.28 to $18.58, Research, Estimates) warned that it will post a fiscal third-quarter loss almost twice as large as current forecasts, citing costs and lost sales related to the Sept. 11 terrorist attack.
The toy retailer joined more than 300 companies issuing profit or sales warnings since the Sept. 11 attacks.
Markets calm
Stocks have held up reasonably and haven't sold off sharply since the U.S. launched attacks on Afghanistan targets Sunday. The effort to destabilize the al Qaeda training camps run by Osama bin Laden have been "successful" U.S. Defense Secretary Donald Rumsfeld said.
Investors have been struggling to handicap the economic impact of Sept. 11, an event which initially sent stocks tumbling. But the major indexes rallied in the last two weeks after the government announced billions of dollars in bailouts and stimulus, and the Federal Reserve cut interest rates for the ninth time this year.
"This thing should go up," Michael Farr, president of Farr Miller and Washington, told CNNfn, referring to the stock market.
But earnings could prove troublesome. Profits at America's largest companies are expected to have fallen by more than 20 percent during the July-September period, a period of rising layoffs and slowing spending.
And survey conducted by Bank of Tokyo-Mitsubishi and UBS Warburg found that retail sales fell 0.8 percent in the week ended Oct. 6.
Upscale retailer Nordstrom (JWN: down $0.29 to $15.17, Research, Estimates) said sales at stores open at least a year dropped 9.4 percent in September, hurt by the attacks and the general economic weakness.
In major retailers, Home Depot (HD: down $0.47 to $37.90, Research, Estimates) continued to fall, but Wal-Mart Stores (WMT: up $0.97 to $52.08, Research, Estimates) bounced back from recent losses. 
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