Updated from 4:05 p.m. EST

Disappointing results from

Hewlett-Packard

(HPQ) - Get Report

, a sharp jump in crude oil prices and persistent worries about war with Iraq left stocks dripping in red ink Wednesday.

The

Dow Jones Industrial Average

ended the session down 102 points, or 1.3%, at 7807, while the

Nasdaq

ended down 25 points, or 1.9%, at 1303. The

S&P 500

fell 11 points, or 1.3%, to 827.

"There's continued indecision over the situation in the Mideast," said Bob Basel, head of stock trading at Salomon Smith Barney. "Until we get a clearer picture, investors are just going to sit on their hands."

Volume on the

Big Board

reached 1.3 billion, with decliners beating advancers by 19 to 12. On the Nasdaq, 1.2 billion shares changed hands, with losers outpacing winners by about 19 to 12.

Stocks rallied late Tuesday partly on rumors that a peaceful solution to the crisis would be found. But that seemed less likely on Wednesday. Chief U.N. weapons inspector Hans Blix said Iraq still had not made a "fundamental decision" to disarm and noted that the inspection process is moving forward only "centimeter by centimeter." He also said the inspection process would take months even if Baghdad fully cooperated.

Meanwhile, in a CBS interview to be broadcast Wednesday, Iraqi leader Saddam Hussein said he would rather die than go into exile.

Adding to the negative tone was a surge in oil prices. Crude oil for April delivery jumped $1.64 to $37.70 a barrel, the highest closing price since Oct. 16, 1990, as the Energy Department reported that U.S. inventories of oil, distillates fuels and gasoline fell last week.

Hewlett-Packard, the largest maker of personal computers, was among the biggest losers in the market after reporting a sequential decline in first-quarter sales, missing analysts' targets. The firm did, however, beat analysts' earnings estimates and reiterated its outlook for the second quarter.

J.P. Morgan reduced its estimates on the stock and Goldman Sachs cut its rating to in line from outperform, noting that "January's quarter was far from clean."

Bear Stearns analyst Andy Neff maintained his 2003 earnings estimates and said the stock appears fairly valued at between $16 an $18 a share. At 13 to 15 times his 2003 earnings estimates, Neff said the stock is at the low end of its historical range and trades at a discount to

IBM

(IBM) - Get Report

, reflecting H-P's lower profitability and predictability. H-P fell 15% to $15.37.

In the brokerage sector,

Morgan Stanley

(MWD)

fell 2% to $35.42 on a report that it may face civil charges for IPO abuses in the late 1990s.

The Wall Street Journal

reported that the

Securities and Exchange Commission

is expanding its investigation into the way the firm gave preference to clients when selling shares from IPOs based on their commitment to buy additional stock after trading began.

Shares of

Microsoft

(MSFT) - Get Report

were lower even though Deutsche Bank upgraded the stock to buy "on a trading basis" with a 12-month target of $30. The analyst thinks there is maybe 10% to 15% downside and potential upside of 25%. Microsoft fell 2% to $23.60.

Dow component

International Paper

(IP) - Get Report

was higher, however, after Prudential Financial raised its rating to hold from sell and upgraded the paper industry to market outperform from market perform. The analyst said IP has made greater than expected progress in cost cuts and that product prices have improved. IP gained 0.06% to $34.94.

Alcoa

(AA) - Get Report

fell 0.3% to $20.28 after Prudential raised its rating on the aluminum sector.

Although the major averages were in negative turf Wednesday, a couple of experts said the market could soon change course. James De Porre, a trader and contributor to

TheStreet.com's

sister site

RealMoney

, noted that the weekly Investor's Intelligence survey showed a decrease in bulls to 40.4% from 41.6%, and an increase in bears to 36% from 33.7%.

"The bulls and bears are edging closer and closer to crossing, which would be an important sign that negativity is reaching levels where a reversal is increasingly likely," he said. Still, he added, "We have a lot further to go to reach the levels we have seen at previous bottoms."

Meanwhile, Woody Dorsey, president of Market Semiotics, said that news about Iraq is reaching a fever pitch, and that when one event becomes this overwhelming, it typically means that the market is about to turn around. Dorsey said stocks could enjoy a six-month rally, though it might not start for another month.

In other news,

Federal Reserve Board

Chairman Alan Greenspan said in a speech that he was surprised at the magnitude of a recent drop in consumer confidence, which he attributed to rising oil prices and concerns about war.

Treasuries were higher, with the 10-year note up 3/8 to yield 3.78%. The dollar was trading lower against the euro and Japanese yen.

On Tuesday, stocks reversed big losses from earlier in the day to end broadly higher. The Dow gained 0.7% to 7909, while the Nasdaq rose 0.5% to 1329. The S&P 500 moved up 0.7% to 838.

Overseas markets ended lower, with London's FTSE 100 down 0.6% to 3599 and Germany's Xetra DAX down 0.8% to 2463. In Asia, Japan's Nikkei closed 0.04% lower at 8356, while Hong Kong's Hang Seng lost 0.35% to 9116.