Updated from 4:09 p.m. EDT

Stocks closed near their worst levels of the day Thursday as investors started selling in the afternoon following another flood of corporate earnings and outlooks.


Dow Jones Industrial Average

closed down 133 points, or 1.6%, to 8409. The


lost 40 points, or 2.9%, at 1357, and the

S&P 500

fell 24 points, or 2.7%, at 881.

After the close Wednesday,


(IBM) - Get Report

, the world's largest computer company, reported a big drop in second-quarter earnings and said it will incur a steeper-than-expected restructuring charge for previously announced job cuts and the sale of its hard disk drive business.

IBM posted a profit of $56 million, or 3 cents a share, according to generally accepted accounting principles. Those results include $2.1 billion in pretax charges. In the year-ago quarter, IBM earned $1.15 a share. Excluding charges, the company posted earnings of 84 cents, beating analysts' expectations by a penny. IBM also lowered its forecast for the second half of the year, saying revenue growth in its services segment will be slower than anticipated.

Goldman Sachs lowered its estimates on the stock, citing the cautious commentary. Shares ticked up, however, adding 1.9% to $72.04.

Software developer

Siebel Systems


endured another difficult quarter as earnings fell due a weak software spending environment. The company's bottom line was 3 cents shy of analysts' forecasts. Siebel also said it would cut 16% of its workforce, in an effort to cope with declining revenue.

Subsequently, at least two brokerages lowered their ratings or price targets on Siebel. The company's shares dropped 18.1% to $9.62.

Cell-phone maker


(NOK) - Get Report

posted second-quarter earnings that were in line with analysts' expectations and reaffirmed its earnings and revenue outlook for 2002. Nokia said it still sees second-half sales growth of 3% to 10%, but the company lowered guidance for second-half handset sales. Shares lost 5.5% to $13.34.

Bill payment services firm

Automatic Data Processing

(ADP) - Get Report

was hammered after a disappointing quarter led Prudential Securities to put a sell rating on the stock. Shares lost 23.6% to $31.60.

Media titan

AOL Time Warner


fell 5% to $12.45 after a story published in

The Washington Post

suggested that the company used some unconventional transactions to inflate revenue figures from 2000 to the present. Another article in

The Wall Street Journal

reported that AOL is considering a shake-up in management, giving top-level executives from the old Time Warner significantly greater responsibilities. After the bell the company confirmed Chief Operating Officer Bob Pittman is resigning.

In the drug sector,

Eli Lilly

(LLY) - Get Report

said earnings fell 20% in the second quarter as sales of its antidepressant Prozac declined due to stiffer competition from generic drugs. The stock slid 4.6% to $48.54.

But the news wasn't all bad.

Cooper Tire & Rubber

(CTB) - Get Report

said second-quarter earnings rose, citing stronger sales of its tires and other auto parts. Elsewhere, forest products company and Dow component

International Paper

(IP) - Get Report

beat estimates by 15 cents, as cost-cutting measures and the weaker dollar boosted profits.

Managed healthcare company


(UNH) - Get Report

posted better-than-expected second-quarter results as strong membership growth and price increases helped to offset increased medical expenses. The company said it earned $325 million, or $1.01 a share, compared with $223 million, or 68 cents a share, in the year-ago period. Analysts, on average, were expecting the company to earn 95 cents a share. The stock gave up 3.2% to finish at $89.50

Although earnings news dominated the headlines, there was some positive economic news released this morning. The Labor Department said

initial jobless claims for the week ended July 13 fell to 379,000 from 407,000 the previous week. Economists were expecting the number of first-time insurance claims to come in at 395,000.

The 10-year note was up 20/32nds to yield 4.60% at 4:30 p.m. EDT. Shorter-term notes and the long bond were also gaining ground.