NEW YORK (CNN/Money) - The Dow industrials fell to their worst levels in nearly five months Tuesday on persistent war fears and weak corporate news, and there's little to suggest any relief from such concerns will come on Wednesday.

The Dow Jones industrial average (down 132.99 to 7704.87, Charts) lost 1.7 percent, closing at 7,704.87, its lowest level since Oct. 10, 2002, when it closed at 7,533.95.

The S&P 500 index (down 12.82 to 821.99, Charts) fell around 1.5 percent, while the Nasdaq composite (down 12.52 to 1307.77, Charts) closed a little less than one percent lower.

"It's a continuation of the same concerns. People don't want to put money in when we have nothing but uncertainty on the international front," said Tom Schrader, head of listed trading at Legg Mason. "There's been so much selling already, but whatever is left is enough to drag the market down. People want to sit it out right now."

Wednesday brings the Institute for Supply Management's February report on the services sector of the economy, which is expected to show a reading of 53, down from 54.5 in the previous month, according to a consensus of analysts surveyed by Briefing.com. Anything over 50 implies growth, but much like the ISM's manufacturing report Monday, the services report is expected to show that the pace of growth in the sector has slowed down.

Wednesday also brings earnings reports from a few retailers including Staples (SPLS: Research, Estimates) and Toys R Us (TOY: Research, Estimates).

Bleak economic reports on manufacturing and car sales hurt stocks Monday. Their effect still lingered in the market Tuesday, but investors' focus once again turned to the latest developments in Iraq and North Korea.

Iraq continued to destroy missiles banned by the United Nations even as its president, Saddam Hussein, marked the Islamic New Year with a speech declaring his nation will be "victorious against aggression." Washington continued to send troops to the Middle East, some 60,000 more for a total of 310,000 in the region.

At the other end of the Eastern hemisphere, North Korea sent four jet fighters to intercept a U.S. surveillance plane over the Sea of Japan over the weekend. (For the latest developments from around the world, go to CNN.com.)

In stock-specific news Tuesday, negative analyst notes on Dow components General Motors and Walt Disney and a warning on 2003 sales from Caterpillar knocked the industrials, while finicky trade in biotech and technology shares pressured the Nasdaq.

"It's a lot of different factors," said Donald Selkin, director of research at Joseph Stevens. "Auto sales were no surprise, but that's hurting the Dow, with GM falling, the dollar is down, you've got Warren Buffet making bearish comments, and then there's the usual malaise with Iraq."

In reaction to reports Monday that showed auto sales slumped in the month just ended, Deutsche Bank Securities downgraded Dow component General Motors (GM: down $1.89 to $31.27, Research, Estimates) and rival Ford (F: down $0.33 to $7.74, Research, Estimates) to "sell" from "hold." The firm cited concerns that the downturn in U.S. car demand will continue. GM shares fell 5.5 percent and Ford's shares shed about 4 percent.

In addition, brokerage firm SoundView Technology said it thinks Walt Disney (DIS: down $0.75 to $16.05, Research, Estimates) may need to warn about current-quarter earnings, due in large part to weakness in its parks and resorts unit. Terrorism alerts, war jitters, poor weather in Florida and the recent blizzard along the East Coast have all hurt attendance at the theme parks, SoundView said. As a result, the firm cut its fiscal year 2003 earnings per share forecast to 67 cents from 71 cents. Disney shares fell 4.5 percent.

Shares of heavy equipment maker and Dow component Caterpillar (CAT: down $1.86 to $45.22, Research, Estimates) fell almost 4 percent after the company issued 2003 guidance in which it said that it expects both industry and company sales to be flat with 2002. In addition, profit is expected to be down about 5 percent compared with 2002.

Shares of Nextel Communications (NXTL: down $0.26 to $13.22, Research, Estimates) fell 2 percent and were among the Nasdaq composite's most active after wireless telephone maker Motorola (MOT: down $0.27 to $8.15, Research, Estimates) said it sold about 25 million shares, or 23 percent, of its stake in Nextel to raise cash and realize a profit on some of its investment in the company. Motorola also has entered into agreements that hedge the value of up to 25 million additional Nextel shares over the next five years.

Investors also continued to react to Berkshire Hathaway Chairman and CEO Warren Buffett's annual letter to shareholders, reprinted on Fortune.com, in which he said he "continues to do little in equities," among other bearish comments.

"People are frustrated," said Joseph Stevens' Selkin. "The pattern has been a couple of days of rallies on a little good news and then it fizzles out. There's no reason to make big commitments with all of this unresolved. The hope now is that we can dig in our heels at key support levels and find some balance."

On the New York Stock Exchange, decliners beat advancers by more than 5 to 3 as 1.19 billion shares traded. A little more than 1.19 billion shares changed hands on the Nasdaq, where almost 5 stocks fell for every 3 that rose.

U.S. Treasury bond prices rose, with the benchmark 10-year note gaining 6/32 of a point to 101-26/32, pushing the yield down to 3.65 percent.

The dollar recovered from its early losses versus the euro, hovering near unchanged late Tuesday. The U.S. currency also rose a little versus the yen after trading little changed against it for most of the session.

The price of oil climbed, with light sweet crude futures rising $1.01 to $36.89 a barrel in New York. Gold rallied $4.00 to $353.30 an ounce.