NEW YORK (CNN/Money) - Blue-chip stocks tumbled Tuesday, hurt once again by worries about corporate profits, the economy and a possible war with Iraq. News that the Federal Reserve held interest rates steady had little effect on stocks.

The Dow Jones industrial average fell 189.02 to 7,683.13, its lowest close since October 1998. The Dow first sank to four-year lows back in July, but some traders noted that the index's intraday low of 7,532.66 hit on July 24 is still more than 100 points away.

The Nasdaq composite fell 2.76, or 0.23 percent, to 1,182.17, hitting a fresh six-year low. The Standard & Poor's 500 index dropped 14.41, or 1.73 percent, to end the day at 819.29.

Few Fed watchers had expected the central bank to change rates or alter its bias, which it said remains weighted toward economic weakness. However, news that two committee members had dissented, voting to lower rates, was a surprise.

"We came into the day, week, month with the same three worries -- earnings, the economy, and geopolitical concerns," said Jefferies & Co. chief market strategist Art Hogan. "We're still dealing with all the same negatives and the selling is pretty broad."

Stocks briefly recovered some ground just ahead of the Fed's announcement, but quickly sank back after the news.

In its closely watched statement on short-term rates, the Fed said: "Over time, the current accommodative stance of monetary policy, coupled with still robust underlying growth in productivity, should be sufficient to foster an improving business climate. However, considerable uncertainty persists about the extent and timing of the expected pickup in production and employment owing in part to the emergence of heightened geopolitical risks."

"Consequently, the (Fed's policy-making) Committee believes that, for the foreseeable future, against the background of its long-run goals of price stability and sustainable economic growth and of the information currently available, the risks are weighted mainly toward conditions that may generate economic weakness," the Fed added.

In corporate news, shares of Electronic Data Systems (EDS: down $4.84 to $11.68, Research, Estimates) fell sharply following a pair of negative brokerage notes. Merrill Lynch downgraded the technology services firm to "sell" from "neutral," saying the firm faces a loss from settling derivative instrument exposure that could eliminate the company's free cash flow for 2002. In addition, Sanford Bernstein said it expects the Securities and Exchange Commission to begin an informal inquiry into the company's accounting.

The EDS news put pressure on IBM (IBM: down $3.62 to $59.75, Research, Estimates). In addition, Morgan Stanley issued a cautious note on the Dow component, saying that the funded status and contribution to income from the computer hardware leader's pension plan are likely to decline and that the company's stock option expense is significant and growing, and that both issues are worth monitoring.

International Paper (IP: down $2.21 to $31.94, Research, Estimates), another Dow component, fell more than 6 percent. The paper maker fell along with a number of other competitors after rival Weyerhaeuser (WY: down $5.94 to $43.79, Research, Estimates) slashed its third-quarter earnings-per-share estimates.

General Motors (GM: down $3.42 to $38.16, Research, Estimates), 3M (MMM: down $4.36 to $113.13, Research, Estimates) and Alcoa (AA: down $0.74 to $19.57, Research, Estimates) also were among the Dow's biggest decliners.

Dell Computer (DELL: down $0.20 to $23.99, Research, Estimates) announced that it will work with Lexmark (LXK: up $3.46 to $45.93, Research, Estimates) to producer a line of printers and cartridges under the personal computer maker's brand, a move which could be seen as a threat to rival Hewlett-Packard (HPQ: down $0.59 to $12.29, Research, Estimates), a Dow component.

Shortly after markets opened, the Conference Board said consumer confidence in September was a little stronger than expected, coming in at 93.3 versus the consensus of a decline to 92.4 from a revised 94.5 in August. The news temporarily buoyed markets, but quickly lost out amid all the negatives.

"There's been a technical erosion and it continues to feed off of itself," said Peter Cardillo, director of research at Global Partners Securities. "The confidence number brought in some buying and cut some earlier losses, but the markets are basically still lower for all the same reasons they've been lower of late -- the poor earnings outlook, the prospect of war in Iraq, corporate mistrust."

"The Dow and the S&P are lower; the only thing helping the Nasdaq right now is that it's so oversold," Cardillo added.

Two influential tech companies warned late Monday about the impact of slowing customer orders.

Cisco Systems (CSCO: down $0.53 to $11.43, Research, Estimates), the No. 1 maker of gear that directs Internet traffic, said its customers are having a harder time projecting their near-term business prospects in the current spending environment. Semiconductor production gear maker Novellus Systems (NVLS: up $0.24 to $21.01, Research, Estimates) said customer orders could be even lower than previously projected.

Handheld computer maker Palm (PALM: up $0.10 to $0.86, Research, Estimates) Monday posted a fiscal first-quarter loss that was narrower than expected, but worse than a year earlier due to slack demand. Looking forward, the company warned that second-quarter revenue will be 10-to-15 percent lower than year-ago levels. Following the news, Credit Suisse First Boston and other brokerages trimmed bottom line forecasts.

Credit Suisse also reduced its price target on chipmaker Micron Technology (MU: up $0.19 to $12.95, Research, Estimates) to $16 from $23, saying it expects the company to come in with a bigger-than-expected loss when it reports quarterly results after the close Tuesday.

Lehman Brothers (LEH: down $0.25 to $47.74, Research, Estimates) reported fiscal third-quarter earnings of 70 cents a share, down from $1.14 a year earlier and below the 85 cent per share forecast of analysts. Goldman Sachs Group (GS: up $0.64 to $66.31, Research, Estimates) posted a fiscal third-quarter profit of $1 a share, a penny better than estimates and up from 87 cents a year earlier.

But on the positive side, biotechs were among the sectors strengthening the Nasdaq, after Lehman Bros. resumed coverage of biotech leader Amgen (AMGN: up $2.06 to $42.07, Research, Estimates) with an "overweight" rating.

Another factor in the markets was oil prices. Jitters about a potential U.S. military strike against Iraq and delays in production in the Gulf of Mexico due to Tropical Storm Isidore sent crude futures soaring. Worries about Iraq action were exacerbated following British Prime Minister Tony Blair's statement to an emergency meeting of the House of Commons Tuesday. Light crude futures gained 7 cents to $30.78 a barrel in New York.

The oil surge, tech concerns and Fed jitters all made for a potent bearish combination.

"This is like the perfect storm, with all these negative factors coming together at once," Angel Mata, head of equity trading at Legg Mason, told CNNfn's Market Call.

Treasury prices rose, pushing the 10-year note yield down to 3.64 percent from the 3.68 percent yield late Monday that was the lowest since 1958. The dollar slid versus the yen and the euro. Gold prices rallied.

Market breadth was negative. On the New York Stock Exchange, losers beat winners by nearly 11-to-5 as 1.67 billion shares traded. On the Nasdaq, decliners edged advancers more than 3-to-2 as 1.65 billion shares changed hands.