Updated from 3:28 p.m. EST

Stocks closed sharply lower Wednesday, as cautious comments from

Intel

(INTC) - Get Report

, grim earnings news from the airline and banking industries, and mixed economic reports put investors in the mood to sell.

Preliminary closing numbers showed the

Dow Jones Industrial Average with a loss of 211.88 points, or 2.1%, to 9712.27, while the

Nasdaq dropped 56.47 points, or 2.8%, to 1944.44. The

S&P 500 was off 18.62 points, or 1.6%, to 1127.57.

Industrial production fell for the fifth-straight month, declining 0.1% in December, according to the

Federal Reserve. The results were slightly weaker than the consensus estimate, but it was still the smallest decline in five months. Capacity utilization came in at 74.4%, down from 74.5% in November.

The Labor Department said the

consumer price index fell 0.2% in December, while the core number rose 0.1%. The data were generally in line with economists' predictions. Business inventories fell 1% in November after a 1.6% decline in October.

Elsewhere, the Fed's

Beige Book (

click here for the report) said that economic activity remained weak from late November through early January, and that while "there are still indications of caution, there are also scattered reports of improvement."

Intel posted fourth-quarter operating earnings of 15 cents a share, topping estimates by 4 cents. The report, issued after the bell Tuesday, showed that revenue fell to $6.98 billion from $8.70 billion. The company's chief financial officer said in a conference call that Intel wasn't yet sensing an economic recovery, and predicted 2002 revenue growth and gross margins wouldn't change appreciably from the fourth quarter. Intel's shares were off 97 cents, or 3%, to $33.71.

KLA-Tencor

(KLAC) - Get Report

and

Applied Materials

(AMAT) - Get Report

, along with other chip-equipment makers, were feeling the effects of Intel's plans to cut capital spending in 2002. KLA lost 9.6% to $50.01, while Applied Materials shed 8.9% at $41.55.

Two major airlines reported steep quarterly losses Wednesday as the effects of Sept. 11 lingered on.

AMR

(AMR)

said it lost $798 million in its fourth quarter while

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Continental Airlines

(CAL) - Get Report

said it lost $220 million before items. AMR added 23 cents to $26.02, while Continental gained $1.71, or 5.82%, to $31.10.

J.P. Morgan Chase

(JPM) - Get Report

said it earned 12 cents a share in the fourth quarter, down sharply from a year ago because of the company's exposure to

Enron

, Argentina and losses in its private equity arm. The company's shares lost $1.67, or 4.41%, to $36.20.

General Motors

(GM) - Get Report

posted fourth-quarter earnings of $255 million, or 60 cents a share, down from $609 million, or $1.15 a share, a year ago. Analysts, on average, were expecting the automaker to earn 59 cents a share for the quarter. GM's shares closed down 21 cents to $49.75.

Kmart

(KM)

continued its

downward spiral Wednesday as the troubled discount retailer seeks possible solutions to its cash woes. Some industry experts have predicted Kmart could be headed toward a Chapter 11 bankruptcy filing if the company can't find another fix for its troubles. The stock dropped 36.33% to finish at $1.56.

After the close Tuesday,

Juniper Networks

(JNPR) - Get Report

met lowered fourth-quarter earnings expectations but the networking equipment maker said that the next two quarters will be flat sequentially. Juniper was off $1, or 5.57%, to $16.96.

Shares of

Inspire Pharmaceuticals

(ISPH)

were under heavy selling pressure after the company said its eye treatment, INS365 Ophthalmic, failed to prove effective in a Phase III clinical trial. The stock nosedived $11.36, or 73.24%, to $4.15.

Adelphia Communications

(ADLAC)

said it sold 40 million newly issued common shares to the public at $25.50 each. The company also sold $500 million of convertible stock. Shares of the cable television company fell 44 cents, or 1.61%, to $26.81.

Foreign markets were lower across the board, with London's FTSE 100 losing 0.7% to 5128 and Germany's Xetra Dax down 1.5% to 4984. In Asia, Japan's Nikkei closed down 0.3% to 10,178, while Hong Kong's Hang Seng fell 0.5% to 10,964.

Treasuries were lower. The 10-year Treasury note was recently losing 3/32 to 101 6/32, yielding 4.84%.