Updated from 4:06 p.m. EST

Stocks closed at their lowest level in three weeks Tuesday as weakness in semiconductor shares dragged down the

Nasdaq

while higher bond yields and oil prices weighed on the broader market again.

The

Dow Jones Industrial Average

fell 59.41 points, or 0.55%, to 10,745.10, while the

S&P 500

lost 9.08 points, or 0.75%, to 1197.75. The Nasdaq fell 16.06 points, or 0.78%, to 2034.98, weighed down by a 2.1% decline in the Philadelphia semiconductor index.

Volume stayed light, with 1.5 billion shares trading on the

New York Stock Exchange

and 1.8 billion changing hands on the Nasdaq. Decliners outnumbered advancers by about 2 to 1 on both exchanges.

The 10-year Treasury note closed down 8/32 in price to yield 4.54%, the highest since late July, while the dollar was higher against the euro and lower against the yen.

"The semiconductors have been showing weakness all year, and frankly, this doesn't look like a trend that is going to change," said Barry Hyman, chief market strategist with Ehrenkrantz King Nussbaum. "When you see the semis down, it just creates a negative atmosphere for everything. You just can't have two major indices going opposite each other on a long-term basis. There's just too much overlap."

Leading chip stocks lower was

Intel

(INTC) - Get Report

, which closed down 39 cents, or 1.6%, to $23.88, and

Applied Materials

(AMAT) - Get Report

, which dropped 33 cents, or 2%, to $16.20.

Also weighing on stocks was a report by the

Associated Press

that two military mail facilities in the Washington, D.C., area detected signs of anthrax on two pieces of mail. Authorities are not sure whether the discoveries are signs of an attack. As testing continued Tuesday, President Bush was being regularly updated on the situation, the White House said.

In other markets, the April crude contract closed up 10 cents at $55.05 a barrel, just shy of its record close of $55.17, despite a report from

Bloomberg

that OPEC had already agreed to a 500,000-barrel-a-day increase in output ahead of its meeting on Wednesday.

Adolfo Rueda, senior technical analyst with Shields & Co., predicted oil prices could rise as high as $60 a barrel. "The market could be trying to make a bottom here, with all this short-term pessimism, but with oil in our faces like this, people are still waiting for a catalyst to get things going," Rueda said.

In Wall Street news, a federal jury in Manhattan found Bernard Ebbers, the former chief executive of

WorldCom

, now known as

MCI

(MCIP)

, guilty on one count of conspiracy, one count of securities fraud and seven counts of false regulatory filings. In all, Ebbers could face up to 85 years in prison for engineering the accounting fraud that sank the telecom giant.

Testifying before the Senate Special Committee on Aging,

Fed

Chairman Alan Greenspan said Congress needed to explain to taxpayers that benefit cuts are likely to occur under any plan to restructure Social Security. He cited the estimated $10.4 trillion unfunded liability for Social Security over the indefinite future and noted that the problem is worse with Medicare, as that program's shortfall is "several multiples" of the Social Security deficit.

Elsewhere on the economic front, retail sales rose 0.5% in February vs. expectations for a 0.7% gain. Excluding autos, sales rose 0.4%, about half the rate of growth that was expected by economists. January's 0.3% decline in the headline rate of sales was revised to a 0.3% gain. In sum, the data showed modest growth without any sign of overheating consumer spending.

Also, the New York Federal Reserve Bank's Empire State Manufacturing Index edged up to 19.6 in March from 19.2 in February, just shy of the consensus forecast.

In earnings news,

Lehman Brothers

(LEH)

reported that first-quarter profits jumped 31%, boosted by record revenue in the company's investment-banking and capital-markets units. The financial giants said it earned $875 million, or $2.91 a share, up from $670 million, or $2.21 a share, in the same quarter last year. Revenue increased 21% to $3.81 billion.

In other corporate news, shares of

TiVo

(TIVO) - Get Report

shot up nearly 77% after

Comcast

(CMCSA) - Get Report

announced an agreement that would make TiVo's digital video recorder widely available to its customers.

Kmart

(KMRT)

defied the broader move in the market to set another all-time high, trading as high as $133.85, after last week's aggressive upgrade issued by UBS analyst Gary Balter. Balter raised his target price on Kmart to $160.

Meanwhile,

Women's Wear Daily

reported that

Sears

(S) - Get Report

, which is expected to be acquired by Kmart this month, is seeking a buyer for its Lands' End catalog company at an asking price below the $1.9 billion it paid in 2002. Shares of Sears closed up 29 cents, or 0.5%, to $58.29, while Kmart closed up $1.45, or 1.1%, to $130.20.

American International Group

(AIG) - Get Report

has received retirement notice from its CEO, Maurice Greenberg, following months of regulatory scrutiny at the insurance giant. The company named Vice Chairman Martin Sullivan to succeed him.

AIG said it would delay filing its annual report with the

Securities and Exchange Commission

as it deals with the executive shakeup, which also saw CFO Howard Smith take a leave. Smith was replaced by Steven Bensinger, who was the company's treasurer. Its stock closed down $1.89, or 3%, to $61.96.

Time Warner's

(TWX)

AOL unit expects to post advertising growth that is ahead of the industry average this year, according to the division's chief, Ted Leonsis. The AOL vice president told

Reuters

that ad revenue growth will come in above the 20%-25% industry forecast in 2005. The stock closed up 44 cents, or 2.5%, to $18.05.

Overseas markets closed mixed, with London's FTSE 100 closed up 0.5% to 5000 and Germany's Xetra DAX up 0.5% to 4388. In Asia, Japan's Nikkei fell 0.3% overnight to 11,821, while Hong Kong's Hang Seng fell 0.7% to 13,817.

Before Wednesday's opening bell, quarterly earnings reports are expected from

Bear Stearns

(BSC)

and

Ross Stores

(ROST) - Get Report

.

At 8:30 a.m., the government is expected to report that the U.S. current account deficit widened to $183 billion in the fourth quarter, from $164.7 billion in the third quarter.

At the same time, the Census Bureau reports housing starts, which are expected to show an annualized rate of 2.045 million units in February, down from the 2.159 million recorded in January. Also, building permits are expected to have dropped to 2.07 million in February from 2.132 million in the previous month.

At 9:15 a.m., the

Fed

is expected to report that industrial production increased 0.4% in February, down from 0.7% in January, while factories operated at 79.2% of capacity, up from 79.0% in the prior month.