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Updated from 4:06 p.m. EST

Stocks gave up early gains and closed lower on Tuesday after a tape surfaced that the White House believes shows Osama bin Laden is still alive.


Dow Jones Industrial Average

dropped 77 points, or 1%, to 7843.11, and the


ended down 1.17 points, or 0.1%, at 1295.51. The

S&P 500

fell 6.76 points, or 0.8%, to 829.21.

Colin Powell told a Senate panel that a statement by Osama bin Laden, which will be released on the Al-Jazeera network, illustrates the link between Iraq and terrorism. "Once again

bin Laden speaks to the people of Iraq and talks about their struggle and how he is in partnership with Iraq," Powell said.

Meanwhile, in his semiannual report on monetary policy to the Senate Banking Committee,


Chairman Alan Greenspan urged Congress to restore fiscal discipline, but added that a balanced budget is no good if it hurts economic growth. He also offered a cautious view of the economic outlook, saying the prospect of war with Iraq has hurt business investment.

The volatility in the market -- the Dow was up 60 points earlier and then down by more than that later -- is largely due to traders' uncertainty because of the geopolitical situation.

"I'm certainly not ambitious about diving in headfirst with us at war in the three or four weeks, maybe sooner," said Joseph Kalinowski, chief investment officer at Ehrenkrantz King Nussbaum. "I tell clients that fundamentally, I can make a case that the market is undervalued but sentiment is terrible. With so much uncertainty in the coming weeks, volatility is sharp and cash is king right now."

TheStreet Recommends

In earnings news,



said it earned 77 cents a share, excluding various gains, severance and facility charges, on a 22% year-on-year decline in revenue, which reflects the company's exit from businesses. The company topped analyst estimates by 18 cents a share. Aetna shares rose 3.7% to $43.40.

Interstate Bakeries

( IBC), maker of Wonder Bread, warned that it will lose money in the third quarter instead of posting the 16-cent profit expected by analysts. Shares dropped 25.1% to $10.22.



, a maker of educational toys, dropped 16.1% to $20.60, after Banc of America said the company's guidance could be viewed as a disappointment.

Along with Leapfrog, other educational stocks were down.


(SCHL) - Get Scholastic Corporation Report

plunged 22.9% to $25.95 after the company said it will break even in its upcoming quarter on a per-share basis, whiffing the Wall Street expectation of a 31-cent-per-share profit.

Ahead of its earnings release Tuesday evening,

Sycamore Networks


gained 6.9% to $3.25 after RBS Capital upgraded the company to outperform from sector perform.


(NOK) - Get Nokia Oyj Report

gained 1.6% to $14.09, after SoundView upgraded the company to outperform from neutral. The brokerage believes the stock has limited downside risk at these prices and raised its price target to $18 from $16.


(QCOM) - Get Qualcomm Inc Report

rose 0.1% to $37.65 after the company announced that it will start doling out a quarterly dividend of 5 cents a share and will be buying back $1 billion of its own shares over the next two years.


(ORCL) - Get Oracle Corporation Report

, the second-largest software maker behind


(MSFT) - Get Microsoft Corporation Report

, rose 1.4% to $11.92, after USB Piper Jaffray told investors that the company might make a move into the storage space, where it could threaten storage software maker


(VRTS) - Get Virtus Investment Partners, Inc. Report



( BBI) gained 10.3% to $14.50 after reporting fourth-quarter earnings of 17 cents a share, reversing a year-ago loss but falling a penny short of analysts' estimates. Later in the day,

reported that a $11.4 million reserve was not included in Blockbuster's earnings, which are really 23 cents a share. Also, the home video rental chain raised its estimates for 2003 earnings to $1.25, above the market's consensus of $1.20.


(CLX) - Get Clorox Company Report

announced second-quarter earnings of 39 cents a share, topping analyst estimates by 4 cents a share, on a 4.4% year-on-year revenue increase. Shares rose 1% to $40.41.


( IMPH) dropped 0.6% to $17.94. Chief Executive Ann Saad resigned unexpectedly after the company reviewed its expenses and found "a lapse of corporate integrity" going back three years.

Tractor maker

John Deere

(DE) - Get Deere & Company Report

reported first-quarter earnings of 28 cents a share, topping analyst estimates by 14 cents on a 17.3% year-on-year revenue increase. Shares were up 3.2% to $41.80.

On a down note, electronic trading network


( INET) posted a loss of 3 cents a share in the fourth quarter, below the 4-cent estimate analysts had for the company, which runs an electronic market network. Shares fell 9.1% to $3.19.

Treasuries were volatile and moving in the opposite direction of equities, with the 10-year note lately up 2/32 to yield 3.96%.

Overseas markets were higher, with London's FTSE 100 closing up 2.5% at 3669 and Germany's Xetra DAX ending up 1.6% at 2627. In Asia, the Nikkei rose 0.4% to 8485, while Hong Kong's Hang Seng fell 0.4% to 9195.