NEW YORK (CNN/Money) - U.S. investors hoping for better luck after steep stock selling this week will have quite a challenge before them Tuesday, when a shortened trading week kicks off with earnings announcements from a number of high-profile companies.

Stocks closed out their first losing week of 2003 with a broad selloff Friday after Microsoft issued negative guidance for its current quarter and the full year.

Microsoft's news took its toll on a wide variety of technology issues, as well as the broader market. In addition, traders seemed extra-cautious ahead of a three-day weekend -- stock and bond markets will be closed Monday in observance of the Martin Luther King Jr. holiday.

Trading Tuesday and for the rest of the week will mostly be focused on the corporations due to report their quarterly results.

On Tuesday, Dow components 3M (MMM: down $0.33 to $126.32, Research, Estimates), Citigroup (C: down $0.31 to $36.80, Research, Estimates) and Johnson & Johnson (JNJ: up $0.11 to $54.79, Research, Estimates), as well as Ford Motor (F: down $0.27 to $10.16, Research, Estimates), are all expected to report results before the bell. After the close of trade, telecom Motorola (MOT: down $0.36 to $8.77, Research, Estimates) is due to report results.

Economic reports on housing starts and building permits are also expected Tuesday, before the open. (For a more detailed outlook for the week ahead, click here.)

"I think you're looking out two quarters, maybe even three quarters before you start to see a substantive increase in earnings for some of these companies. That, to me, is in a nutshell what's going on in the markets," Peter Mancuso, a New York Stock Exchange Specialist at Performance Specialist Group, told CNNfn's Street Sweep.

"I think we're in a trading band here, up or down 200 to 300 points either way, and we're going to stay here for a while until the Iraq thing gets settled," he said.

Although stocks may have closed down this week, they are still up on the year thanks to a strong early January performance.

For the week, the Dow is down around 2.3 percent, the Nasdaq is down around 4.9 percent, and the S&P 500 is down around 2.8 percent.

Year-to-date, the Dow is up 2.9 percent, the Nasdaq is up 3 percent and the S&P 500 is up 2.5 percent.

The Nasdaq composite (down 47.56 to 1376.19, Charts) fell around 3.3 percent. The Dow Jones industrials (down 111.47 to 8586.40, Charts), of which Microsoft is a member, lost around 1.3 percent, while the S&P 500 index (down 12.82 to 901.78, Charts) lost 1.4 percent.

Market participants had been eagerly awaiting Microsoft's results, hoping for signs that the outlook for technology would pick up next year. But, instead, the software company warned that profit in its fiscal third quarter and full fiscal year won't meet estimates and described the current business environment as "challenging" -- news that unnerved already edgy stock investors.

Add to that the fact that the company's fiscal second quarter bottom line only met expectations on profit and fell short of revenue forecasts, and investors saw only reasons to sell.

"When you look at the fiscal third-quarter revenue warning, that's mostly about slow Xbox sales, rather than enterprise-related," said Brad Reback, a software analyst at CIBC World Markets who covers Microsoft.

"But they were also cautious on spending for the next year, which is bothering people after Intel (INTC: down $0.86 to $16.34, Research, Estimates) said similar things and after some of the smaller software companies pre-announced positively which had raised expectations," he said.

The warning overshadowed news of a 2-for-1 stock split and a dividend payout, the first in the company's history. Microsoft (MSFT: down $3.89 to $51.46, Research, Estimates)'s shares, already battered since Thursday night, dropped 7 percent.

"Clearly, some of Microsoft's cautionary comments are weighing on the markets today," CIBC World Markets' Reback added. "I think that investors had gotten a little ahead of themselves in the past couple of weeks in terms of bidding up tech and so now you're getting this pullback."

Microsoft's news took down the stocks of other technology companies, even those that had offered decent profit reports or forecasts.

"It's a very nervous market right now. It reacts violently. You have any bit of news, bad or good, and the hedge funds are all over it. That's who's controlling this market, not the individual investor," said Jon Burnham, portfolio manager at Burnham Securities.

Shares of IBM (IBM: down $4.75 to $81.30, Research, Estimates), another Dow doyen, lost 5.5 percent, despite the company's reporting largely positive earnings that beat estimates. The firm also predicted profit growth of 10 percent this year, in line with Wall Street's own calculations.

But Sun Microsystems (SUNW: up $0.05 to $3.75, Research, Estimates) recovered its losses by late afternoon. The stock had fallen as much as 12 percent after the company reported breakeven results, when analysts expected a small loss. It also suffered after the company said it would no longer provide mid-quarter updates and that it won't issue guidance for its current quarter.

"This [Microsoft news] is going to take a little while for the markets to digest, but there are a lot of tech reports due in the next few weeks, companies that could offer more positive guidance," CIBC World Markets' Reback added.

Fellow Dow component General Electric (GE: down $0.15 to $24.88, Research, Estimates) was met with a similarly cold, though less severe response than Microsoft after it revealed that its earnings fell in the fourth quarter and came in exactly as expected at 31 cents a share. The company forecast earnings per share growth in 2003 of between 3 percent and 13 percent, when analysts expect growth of 7 percent.

AOL Time Warner (AOL: down $0.49 to $14.81, Research, Estimates) shares lost 3.5 percent on Thursday's unsurprising announcement that CEO Richard Parsons will become chairman as well when Steve Case leaves in May. AOL Time Warner is the parent of CNN/Money.

Online auction site eBay (EBAY: up $3.60 to $74.85, Research, Estimates) was among the session's few gainers. eBay reported earnings of 28 cents per share for its fiscal first quarter, 4 cents better than expected and up from 14 cents a year earlier. The company also said that sales and revenue forecasts for 2003 will come in better than expected.

Apart from earnings news, the day's economic news did nothing to help the market. Reports included a jump to a record trade deficit in November, a decline in industrial production in December and a University of Michigan survey on consumer sentiment that came in much lower than expected.

Market breadth was negative. Losers outpaced winners by more than 2 to 1 on both the New York Stock Exchange and the Nasdaq. Some 1.34 billion shares traded on the NYSE and around 1.61 billion shares changed hands on the Nasdaq.

The stock selling made bonds seem a more compelling investment. The benchmark 10-year note rose 1/2 a point in price, pushing the yield down to 4.01 percent from 4.08 percent late Thursday. Bond markets closed early ahead of the Martin Luther King Jr. holiday Monday. Treasury prices and yields move in opposite directions.

The dollar was weaker against the euro and little changed against the yen.

Among key commodities, the price of light crude oil for March delivery gained 15 cents to $32.96 a barrel in New York. Oil for February delivery settled at $34 a barrel, a two-year high, after Secretary of State Colin Powell said that he expected proof by month's end that Iraq was not cooperating with U.N. arms inspectors.

Gold lost $1.30 to $356.80 an ounce.