Updated from 4:07 p.m. EDT

Stocks started the session strong Tuesday, but the major averages reversed course around midday and closed sharply lower as the buying interest from the morning faded.


Dow Jones Industrial Average finished with a loss of 155 points, or 1.7%, to 9126.82. Earlier in the session, the Dow hit an intraday high of 9413.08. The

Nasdaq lost 36.35 points, or 2.5%, to 1423.99, and the

S&P 500 was down 16.58 points, or 1.7%, at 976.14.

Tuesday's action was the opposite of the previous day. Stocks staunched a rout halfway through Monday's trading just after the Nasdaq slipped below its Sept. 21 low and rallied to end higher. As trading opened Tuesday, the major averages used that momentum to race out of the gate, but by midday the pullback was well underway.



Aaron Task wrote in a

column Monday, some factors cited for the initial bounce included quarter-end "window dressing" by mutual funds, short-covering ahead of this week's

Federal Open Market Committee meeting, and a rebalancing into equities by pension funds that had become overweight in bonds.

Tuesday and Wednesday's FOMC meeting was widely viewed as a nonevent, although traders are often loath to carry short positions into one. The central bank is expected to leave interest rates unchanged, and economists believe that the tentative state of the recovery will stave off rate hikes until late 2002.

Headlining Tuesday's economic calendar was the Conference Board's

consumer confidence index, which fell to 106.4 in June, slightly ahead of the consensus estimate, compared with a reading of 110.3 in May. Separately, existing-home sales fell 0.3% in May to a 5.75 million annualized rate, also better than the 5.70 million consensus.

Adding more evidence to the continuing strength of the housing sector was homebuilder

KB Home

(KBH) - Get KB Home Report

, which blew by second-quarter estimates and lifted its full-year guidance. KB still ended down 4% to $50.49.

Several companies were releasing earnings or outlooks, among them


(DD) - Get DuPont de Nemours, Inc. Report

, a maker of industrial chemicals and plastics and a member of the Dow industrials. DuPont raised its second-quarter earnings outlook, citing higher sales at its various businesses, to 64 cents to 67 cents a share from the previous estimate of 55 cents. The stock climbed 0.3% to $43.24.

Consumer products company


(DL) - Get China Distance Education Holdings Ltd. Sponsored ADR Report

said second-quarter earnings would come in ahead of analysts' expectations due to strong U.S. sales, favorable product costs, and better-than-expected results in Argentina. Investors sent Dial's shares up 5% to $20.38.

Overnight parcel carrier


(FDX) - Get FedEx Corporation Report

said its fourth-quarter earnings more than doubled, but warned that it wouldn't meet its financial targets for the first quarter. The company posted a profit of $236 million, or 78 cents a share, compared with $113 million, or 38 cents a share, in the year-ago period. The results topped analysts' forecasts by a penny. Shares of FedEx lost 14% to $48.


(PAYX) - Get Paychex, Inc. Report

, a payroll services firm, said quarterly earnings were relatively flat with year-ago levels as widespread layoffs across its customer base hurt performance. The company's shares slid 6.5% to $29.17 on the news.

Two of the biggest losers were



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after federal regulators voted to block their proposed merger. The Federal Trade Commission ruled that the merger would hurt competition in the cervical cancer testing market. Cytyc's shares were down more than 40% and Digene was lost 23%.

Elsewhere on the merger front, the battle is heating up for



. British defense contractor

BAE Systems


is one of three companies ready to submit an offer to purchase TRW's space and defense units, according to

The Wall Street Journal


General Dynamics

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(RTN) - Get Raytheon Company Report

have also tossed their hats in the ring, challenging

Northrop Grumman's

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$6.7 billion hostile bid for the whole company made in February.

Media titan

AOL Time Warner


said after the close Monday that it has restructured its cable television partnership with

Advance/Newhouse Communications

after months of negotiations. Under the terms of the restructuring, AOL will lose 2.1 million subscribers, or 16% of its estimated 12.9 million cable TV subscribers. AOL slipped 0.7% to $15.40.

In another development in the media industry,


(V) - Get Visa Inc. Class A Report

embattled chief executive Jean-Marie Messier suffered a setback when

Louis Vuitton's


Bernard Arnault, one of his biggest supporters, announced his resignation from the Vivendi board.

The announcement comes just days before Messier was scheduled to meet with shareholders to discuss his debt-reduction strategy. The company's shares ended flat at $19.80.

U.S. Treasury issues were mostly higher around 4 p.m. EDT, with the exception of the long bond, which ticked lower. The 10-year note was up 2/32 to 100 13/32, yielding 4.82%.

Overseas markets were mixed, with London's FTSE 100 gaining 2% at 4631 and Germany's Xetra DAX cloing up 1.8% at 4203. Japan's Nikkei 225 rose 0.2% to 10,497, while the Hang Seng closed down 0.5% to 10,609.