NEW YORK (CNN/Money) - A cautious industry outlook from chip leader Intel, brokerage downgrades in retail, and a worse-than-expected consumer confidence report all helped knock U.S. stock indexes lower Tuesday.

The Nasdaq composite lost 43.96, or 3.16 percent, to 1,347.78. The Dow Jones industrial average fell 94.60, or 1.06 percent, to close at 8,824.41. The Standard & Poor's 500 index fell 13.13, or 1.39 percent, to close at 934.82.

After the close of trade, computer hardware maker Hewlett-Packard (HPQ: down $0.28 to $13.93, Research, Estimates) reported earnings of 14 cents per share for its fiscal third quarter, in line with estimates and up from 11 cents a year earlier on revenue that was a little lighter than expected. Looking forward, the company reaffirmed fourth-quarter guidance of earnings of 22 cents per share.

"People were kind of cautiously awaiting Hewlett all day, wondering after Intel what they might say," Kenneth Polcari, managing director with Polcari/Weicker, told CNNfn's Street Sweep. "They met estimates and the stock is up after hours, so that might help us tomorrow [Wednesday]."

No significant economic news or quarterly reports are expected on Wednesday.

Stocks rallied early in Tuesday's session on enthusiasm surrounding strong July orders for durable goods, but they quickly dropped after the release of weaker-than-expected July consumer confidence numbers and on weakness in tech.

"The durable goods made it look like the market was ready for a jump, but confidence knocked it back down. We're also in the worst of the summer doldrums. Then, Intel is also putting a damper on things. Markets tried to rally earlier, but couldn't because of Intel. The stock could probably hit its 52-week low soon," said Matt Ruane, director of listed trading at Gerard Klauer Mattison.

The CEO of No. 1 chipmaker and Dow component Intel (INTC: down $0.20 to $16.98, Research, Estimates) said that due to a decline in business spending, the company expects only modest growth in its third quarter from its second quarter, although the company will continue investing in new technology despite the weak market.

The comments pressured other chip and chip-equipment makers, including Applied Materials (AMAT: down $0.36 to $13.57, Research, Estimates), KLA-Tencor (KLAC: down $0.26 to $33.94, Research, Estimates) and Novellus (NVLS: down $0.59 to $24.55, Research, Estimates).

Retailers were hit by the consumer confidence numbers and by a Merrill Lynch downgrade of the specialty sector. The firm cut its ratings on AnnTaylor Stores (ANN: down $0.36 to $26.14, Research, Estimates), The Limited (LTD: down $0.56 to $15.39, Research, Estimates), and Williams-Sonoma (WSM: down $0.30 to $22.35, Research, Estimates), downgrading the stocks to "neutral" from "strong buy."

In addition, HealthSouth (HRC: down $1.24 to $5.47, Research, Estimates), a provider of outpatient rehabilitative services, was the New York Stock Exchange's No. 1 most active stock and one of its biggest decliners. The company said its board has approved a plan to separate its surgery center division into a publicly traded company due to negative developments in outpatient therapy reimbursement. The company also said it won't issue earnings guidance for the rest of 2002 and 2003 due to uncertainties surrounding all of these developments.

"Considering everything, the action is pretty good. To have a company like Intel come out and make comments like that and have the Dow not be down even further is a positive," said Gerard Klauer Mattison's Ruane. "Clearly, we've set a floor here, but we're probably going to be in a trading range until some big company comes forward and says revenue is looking up for the next quarter.

The Conference Board, a private business research group, said its consumer confidence index fell to 93.5 in August from a revised 97.4 in July. Economists surveyed by Briefing.com were expecting a reading of about 97.0. The decline is particularly relevant as the report is seen as a barometer of consumer spending, which fuels about two-thirds of the U.S. economy.

The report overshadowed an earlier, more positive economic report showing that demand for durable goods -- products meant to last three years or longer -- saw a surprising 8.7 percent rise to $179.7 billion in July after a revised 4.5 percent decline in June. Economists expected orders to rise 1.4 percent.

"Clearly you're seeing conflicting signs about the economy and the market reacting to that," said Douglas Altabef, managing director at Matrix Asset Advisors.

"But I think the way the market is acting is actually healthy," Altabef said. "You're seeing a real resilience on the part of the market. You're seeing a willingness to shrug off or contextualize not great news, which is a big improvement over June and July, when if the market was open, it was down."

European markets closed higher, while in Asia, markets finished lower.

Treasurys fell on the economic news, pushing the yield on the 10-year note up to 4.27 percent.

The U.S. cannot afford to wait in taking action against Iraqi President Saddam Hussein, Vice President Dick Cheney said, speaking at a meeting of the Veterans of Foreign Wars Tuesday. He was responding to some recent public criticism by a number of Republicans about the viability of attacking Iraq at the present time.

Initially, the talk seemed to boost the price of oil, which also was buoyed by concerns that OPEC won't increase oil production in the fourth quarter. But the early rally retreated, with light crude futures falling 45 cents to $28.83.

However, the talk hurt the dollar, knocking it lower versus the euro and the yen.

Market breadth was negative. On the New York Stock Exchange, decliners beat advancers by almost 5-to-3 as 1.22 billion shares changed hands. On the Nasdaq, losers beat winners by 11-to-5 as 1.49 billion shares traded.