NEW YORK (CNN/Money) - U.S. stocks closed lower Tuesday after a warning from Dow component McDonald's, weakness in the dollar, and bearish retail forecasts caused a selloff in blue chips and techs.

The Dow Jones industrial average (down 92.01 to 8535.39, Charts) fell more than 1 percent. The Standard & Poor's 500 index (down 7.41 to 902.99, Charts) and the Nasdaq composite (down 8.29 to 1392.04, Charts) suffered smaller declines. All three indexes reversed course from Monday's robust rally.

Market watchers said investors were worried that the fourth quarter may not show a pickup in corporate profits.

"There's skepticism out there," Ned Riley, chief investment strategist with State Street Global Investors, told CNNfn's Street Sweep. "Companies are extremely cautious about giving a decent outlook. They've set a much lower level of expectation for the public and the analysts out there."

Market breadth was negative on light volume. On the New York Stock Exchange, decliners beat advancers about 5 to 3 as 1.1 billion shares were traded. On the Nasdaq, losers edged winners by about 2 to 1 as 1.2 billion shares changed hands.

Some traders indicated that the market could continue to see volatility heading toward a "triple witching" Friday, when contracts for stock index futures, stock index options, and stock options all expire.

Meanwhile, Oracle is expected to report its quarterly results Wednesday of an 8 cents a share profit compared with a profit of 10 cents a share a year earlier. Bear Stearns also posts its quarterly results. The financial services firm is expected to earn $1.24 a share, up from $1.08 a year ago.

Jitters about a possible U.S. war against Iraq also pulled money away from stocks into "safe-haven assets." Gold prices spiked higher, while a weak dollar put investors in a risk-averse mode.

Gold hit a five-year high, rising above $340 an ounce early Monday for the first time since June 1997, amid heightened concerns about a possible war between the United States and Iraq.

The dollar reached a three-year low against the euro before rebounding on the back comments out of Washington. The weakness in the greenback reflected investor nervousness in anticipation of the final verdict from Washington expected Friday on the disclosures in documents that Iraq handed over to the United Nations Dec. 7.

The Bush administration said Tuesday it continued to support a strong dollar, according to news reports.

McDonald's (MCD: down $1.39 to $15.99, Research, Estimates) was the most active stock on the New York Stock Exchange. The company shares slumped after it slashed its fourth-quarter earnings guidance, saying it expects a net loss on the period as it takes $435 million in restructuring charges. Excluding charges, the company plans to post a profit of between 25 and 26 cents a share, compared with expectations for a profit of 31 cents a share.

Johnson & Johnson (JNJ: down $0.91 to $54.67, Research, Estimates) was another Dow laggard. J.P. Morgan said it believes investor focus is at risk of shifting away from coated stents -- used in cardiology care -- and back to the company's pharmaceutical business where increasing competitive pressure and a depleted pipeline could produce slower growth going forward.

Shares of General Electric (GE: down $0.43 to $26.00, Research, Estimates) lost value after the company late Monday reaffirmed its 2002 and 2003 earnings estimates at the lower end of its guidance, saying that it continues to see turbulence in its aerospace and financial units.

Some dour news from the nation's retailers caused concern about the important holiday shopping season. Target (TGT: down $2.05 to $29.75, Research, Estimates) fell after the discount and department store operator said its sales were well below expectations so far in December, the biggest holiday shopping month of the year. Consumer electronics retailer Best Buy (BBY: down $1.40 to $24.00, Research, Estimates) beat its third-quarter earnings estimate but warned about its fourth quarter, citing losses at its Musicland operations.

Asian-Pacific stocks finished mixed Tuesday, with Tokyo's Nikkei index snapping a nine-session losing streak with a 0.7 percent gain. European markets slipped on concerns about the mounting tensions between the United States and Iraq.

Light crude oil futures remained close to two-month highs at $29.94 a barrel in U.S. trading. Venezuela halted its oil exports amid the ongoing strike and civil unrest in the country.

Treasury prices rose, sending the 10-year note yield down to 4.11 percent from 4.14 percent late Monday.