NEW YORK (CNN/Money) - The U.S. stock market's two-session rally fizzled Tuesday after Nortel Networks became the latest communications equipment maker to say business has yet to rebound.
But the major indexes, though lower, finished well off their worst levels of the day as investors fleeing Nortel, Cisco Systems and others bought food, drug, and biotechnology shares.
The Nasdaq composite index shed 12.44 points, or 0.7 percent, to 1,834.22, recouping more than half of its earlier loss. Down as much as 73 points, the Dow Jones industrial average ended with a 21.04 decline to finish at 9,863.74. The Standard & Poor's 500 shed 4.44 to 1,107.50.
Tuesday did nothing to break Wall Street's rut. After rallying in October, the major indexes have essentially gone nowhere as investors wary about the accuracy of corporate accounting await more signs of economic improvement.
"There's not a lot of conviction," Michael Driscoll, equity trader at Credit Suisse First Boston, told CNNfn's Street Sweep.
On Capitol Hill, former Enron CEO Kenneth Lay declined to testify to a Senate panel that earlier hammered him about the energy trader's collapse.
"That may be a ... distraction," said Charles Payne, head analyst at Wall Street Strategies, who also linked the declines to "a little bit of profit taking" following two big gains.
More stocks fell than rose. On the New York Stock Exchange, declining stocks edged advancing ones as 1 billion shares traded. Nasdaq losers edged winners 9-to-8 as nearly 1.6 billion shares changed hands.
In other markets, the dollar fell against the yen and was little changed versus the euro. Treasury securities declined.
Nortel knocked
Nortel Networks (NT: down $0.42 to $6.42, Research, Estimates) fell as much as 9 percent after saying current-quarter sales could fall 10 percent from the last quarter. The company also announced the resignation of its chief financial officer amid questionable investment transactions.
"All of us were much more concerned about Nortel's performance and outlook, Kenneth Leon, who covers Nortel for ABN Amro, told CNNfn's Street Sweep.
Dresdner Kleinwort Wasserstein said it's worried about Cisco's accounting practices. It cut Cisco's (CSCO: down $0.43 to $17.26, Research, Estimates) price target to $13 a week after the company projected disappointing sales.
With investors wary about suspicious bookkeeping, companies with any similarities to Enron have been punished this year. Concerns about the strength of any corporate profit recovery have also put a brake on stocks.
After the close of trading, chip equipment maker Applied Materials (AMAT: down $0.97 to $44.71, Research, Estimates) said fiscal first-quarter profit fell to two cents a share from 50 cents per share in the year-ago period.
The Dow's biggest gainer, Procter & Gamble (PG: up $1.84 to $83.55, Research, Estimates), rose near a 52-week high of $84.22. The company's pharmaceuticals unit announced a biotechnology alliance with a privately held genomics firm.
Other blue-chip advancers included Merck (MRK: up $0.77 to $60.22, Research, Estimates) and SBC Communications (SBC: up $0.70 to $36.05, Research, Estimates), which received a "buy" recommendation from brokerage Raymond James.
Biotechs rose after Merrill Lynch called Genzyme (GENZ: up $2.42 to $46.20, Research, Estimates), Amgen (AMGN: up $1.36 to $59.00, Research, Estimates), and Medimmune (MEDI: down $0.15 to $41.80, Research, Estimates) its favorite stocks in the group.
Among the day's other gainers, insurer MetLife (MET: up $0.80 to $30.37, Research, Estimates) reported rising fourth-quarter profit Tuesday that topped Wall Street expectations.
BP (BP: up $0.19 to $46.70, Research, Estimates), the No. 3 oil producer, said fourth-quarter profit fell to 59 cents a share, although that still managed to top forecasts.
Taking the Fifth
In the Enron hearings, Lay made a brief statement expressing sadness for the company's demise before exercising his Fifth Amendment right against self-incrimination. "It may be perceived by some that I have something to hide," said Lay, whose lawyers advised him to keep silent.
Lay sat silently as senators criticized the man who presided over the slide into bankruptcy of what was once the nation's seventh-largest company. A week of earlier hearings have revealed little about how Enron misled investors for so long.
Also hanging over the markets, the FBI issued a new, more specific terror alert Monday night. It said authorities should be on the lookout for a man from Yemen or Saudi Arabia and his associates who may be planning an attack on U.S. interests in the United States or Yemen as early as Tuesday.
The major stock indexes long ago recovered from the Sept. 11 terrorist attacks but have made no progress this year. Tuesday's losses widened the Dow industrials' 2002 decline to 1.6 percent. The Nasdaq stands 6 percent lower on the year.
"I think that we had an incredible performance yesterday (Monday)," Michael Holland, chairman of Holland & Co,, told CNNfn's Market Call. "I think today (Tuesday) is just giving up some of what we put together over the last two days." 
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