NEW YORK (CNNmoney) - Disappointing profit reports sent the U.S. stocks lower Tuesday as investors cast a wary eye toward the rising number of anthrax cases.
Exxon-Mobil and Lucent Technologies posted quarterly results that missed forecasts, one day after SBC Communications and American Express also fell short.
The latest anthrax developments brought the death toll to three, while a New Jersey postal worker contracted the lung form of the disease. Within minutes of the closing bell, a White House spokesman said anthrax was found at a site handling the president's mail, as investors struggled to re-price shares amid apparent bioterrorism.
The Nasdaq composite broke a three-day winning streak but remains above pre-terrorist attack levels. And even with Tuesday's losses, the Dow Jones industrial average has jumped more than 13 percent since Sept. 21, the first week stock trading resumed after the attack.
Given those gains, analysts called Tuesday's pullback unsurprising.
"At current levels, we run the risk of profit taking and earnings disappointments," said Alan Ackerman, market strategist at Fahnestock & Co., who said the market is hungry for details of whatever economic stimulus package emerges from Congress.
Ackerman warned that the uncertainty of anthrax and military action in Afghanistan may shape direction for weeks to come.
Tuesday's losses came even as AT&T Wireless, DaimlerChrysler, Expedia, and EchoStar Communications said earnings topped forecasts.
The Nasdaq composite index dipped 3.65 to 1,704.43, while the Dow Jones industrial average shed 36.95 to 9,340.08. The Standard & Poor's 500 index fell 5.12 to 1,084.78.
More stocks fell than rose. On the New York Stock Exchange, declining stocks beat advancing ones 1,589 to 1,530 as 1.3 billion shares changed hands. Nasdaq losers topped winners 1,924 to 1,682 as 1.8 billion shares traded.
In other markets, the dollar gained against the yen and was little changed versus the euro. Treasury securities were flat.
Sifting the numbers
The Dow's biggest loser, SBC Communications, fell for a second day after two brokerages downgraded the regional phone company following a disappointing profit report.
Merrill Lynch cut its profit growth rate for SBC (SBC: down $2.62 to $38.78, Research, Estimates) to 6 percent from 7.5 percent. Goldman Sachs downgraded SBC to "market outperform" from its "recommended list."
In other disappointments, Exxon Mobil (XOM: down $0.25 to $40.87, Research, Estimates) said its profit fell to 48 cents a share in the third quarter, missing estimates.
American Express (AXP: down $0.06 to $30.26, Research, Estimates) also hurt the Dow. The financial services company's profit fell 60 percent in the latest quarter, missing estimates.
Lucent Technologies (LU: down $0.26 to $6.64, Research, Estimates) posted a wider-than expected loss in the latest quarter.
Chipmaker Altera (ALTR: up $0.22 to $20.20, Research, Estimates) warned that its revenue will decline by as much as 10 percent in the fiscal fourth quarter compared with last quarter's numbers.
Outside Wall Street, A New Jersey-based postal worker has been diagnosed with the inhaled form of the anthrax, according to a state official, after it was confirmed that two Washington, D.C., postal workers died from the bacteria. White House Press Secretary Ari Fleischer said the bacteria has been detected in a facility where White House mail is sorted.
While threats of bioterrorism hurt stocks last week, those fears eased Monday. But each revelation results in at least a temporary stock pullback.
"The country's never had reports of an anthrax scares (like this) before," Art Cashin, NYSE floor trader at UBS PaineWebber, told CNNfn's Halftime Report.
Among gainers, AT&T Wireless (AWE: up $1.26 to $14.20, Research, Estimates) posted earnings that topped forecasts, one year after the AT&T spinoff lost money.
Similarly, profit at DaimlerChrysler (DCX: up $0.83 to $35.86, Research, Estimates), the No. 3 automaker, showed unexpected strength.
And Expedia (EXPE: up $2.60 to $31.83, Research, Estimates), one of the few Internet companies that makes money, said its profit was 24 cents a share in its fiscal first quarter after losing 4 cents a share a year earlier.
After the close of trading, No. 1 online retailer Amazon.com (AMZN: up $0.78 to $9.55, Research, Estimates) posted a narrower third-quarter loss of 16 cents a share, matching estimates.
Reasons for optimism
Once all the figures are in next month, third-quarter earnings are expected to have fallen more than 20 percent. But many of the results have topped forecasts, encouraging investors braced for the worst.
Bulls expect that profits will rebound next year under lower interest rates, rising government spending and lower taxes.
"It is a market looking at the future," Barry Hyman, chief investment strategist at Ehrenkrantz King Nussbaum, told CNNfn's Market Call.
Even with Tuesday's losses, the Dow industrials need to add just 265 points to reach pre-terrorist attack levels.
A weekly retail survey conducted by Bank of Tokyo-Mitsubishi and UBS Warburg found that sales rose 0.5 percent. Steven Wood, economist at FinancialOxygen.com, said consumers, encouraged by sales, are opening their wallets.
But with layoffs rising, Wood said he doubts that retail sales will rebound strongly any time soon.
The most actively traded stocks on the NYSE, insurer Principal Financial Group (PFG: up $2.50 to $21.00, Research, Estimates), rose about 12 percent, climbing as high as $21.39 in its first day of trading after being priced at $18.50.
But Enron (ENE: down $0.86 to $19.79, Research, Estimates) fell for a second day. The Securities and Exchange Commission has asked Enron for information on unspecified transactions after reports last week of losses tied to a limited partnership once managed by a company executive. 
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