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Updated from 4:09 p.m. EDT

Following negative comments from analysts on the software and semiconductor sectors and a muted response to President Bush's speech on corporate governance, sellers took control and stocks finished near their worst levels of the session Tuesday.

Trading was choppy early in the day, and for a time the major averages were slightly positive, but buyers were eventually overwhelmed. The

Dow Jones Industrial Average ended with a loss of 178.81 points, or 1.9%, at 9096.09, while the

Nasdaq fell 24.48 points, or 1.7%, to 1381.13. The

S&P 500 dropped 24.15 points, or 2.5%, to 952.83.

For the most part, research reports issued before the opening bell kept buyers in check in the first half of the day, as several firms offered negative comments on various groups in the technology sector.

Merrill Lynch lowered its investment rating and earnings estimates on a number of semiconductor-equipment companies, saying a pause in orders in the second half has become more likely over the past few weeks.

The firm downgraded

Applied Materials

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,

KLA-Tencor

(KLAC) - Get KLA Corporation Report

and

Novellus

TheStreet Recommends

(NVLS)

, among others. All three names traded down more than 5%.

Deutsche Banc Securities also had negative comments on the group, cutting its earnings outlooks and price targets for eight chip-equipment makers. Deutsche said order momentum for the companies will likely slow.

In addition, Salomon Smith Barney cut its 2002 and 2003 earnings estimates on microprocessor maker

Intel

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and slashed its price target to $27 from $45. Shares of Intel fell 3% to $17.96.

Meanwhile, Bear Stearns initiated coverage of

Siebel Systems

(SEBL)

at unattractive and set a price target of $9. The stock slid 5% to $12.49. Bear also started coverage of

PeopleSoft

(PSFT)

, this time with a neutral rating, and set a price target of $18 on the stock. PeopleSoft lost 4% to $14.96.

In a speech delivered on Wall Street this morning, President Bush called for "a new ethic of personal responsibility" among corporate leaders. He outlined a plan to implement stiffer penalties for corporate leaders who knowingly misrepresent their companies' earnings, asking for a doubling of the maximum jail term for mail and wire fraud, and generally tougher sentencing guidelines for corporate officers who cheat investors.

"The president wants to expose and punish acts of corruption, move corporate accounting out of the shadows and protect small investors and pension holders," according to a White House statement released ahead of Bush's speech.

His address came a day after embattled

WorldCom

(WCOME)

executives refused to answer questions before a congressional panel regarding the company's $3.8 billion accounting fraud.

Atop the earnings docket was

Pepsi Bottling

(PBG)

, which said second-quarter earnings rose on strong sales of new soft drinks. The company's results were in line with analysts' expectations, and Pepsi Bottling also raised its full-year cash flow guidance and reaffirmed its earnings forecast. Even so, shares of Pepsi Bottling dropped 14% to $27.75.

Several retailers and chain-store operators also offered up their quarterly results. Apparel designer

Nautica

(NAUT)

recorded a first-quarter loss on costs associated with compensating employees who lost jobs when the company closed down a plant. But Nautica increased its second-quarter earnings forecast, lifting the company's shares 12% to $13.

Elsewhere in the retail space, teen clothier

Pacific Sunwear

(PSUN)

reported a 10.5% increase in June same-store sales, prompting the company to raise its second-quarter earnings expectations to 18 cents a share, up from the previous forecast of 15 cents. Shares rose 9% to $24.48.

Software developer

Retek

(RETK)

was one of the biggest losers of the day, dropping 63% to $6.46 after warning that third-quarter and full-year earnings would fall short of expectations due to disappointing sales volume. Another software company that took a beating was

Citrix

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, which fell 16% to $5 after issuing a profit warning of its own.

Jewelry merchant

Tiffany

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warned that it wouldn't meet its second-quarter financial targets, sending shares tumbling 9% to $30.49.

Outside the U.S., Irish drugmaker

Elan

(ELN)

announced the resignation of Chairman and Chief Executive Donal Geaney, just a few hours before he was scheduled to address shareholders about the company's financial situation.

The stock has dropped 95% year-to-date on concerns over the company's debt load and accounting practices. The stock fared well for most of the day as investors hoped a change at the helm would help the company get back on track, but it reversed course during afternoon trading and finished down 18% to $1.80.

U.S. Treasury issues were higher around 4 p.m. EDT. The 10-year note was up 17/32 to 101 5/32, yielding 4.72%. The 30-year bond was gaining almost a point.

Europe's markets were weaker. London's FTSE 100 lost 1.3% to 4543, and Germany's Xetra DAX dropped 1.6% to 4370. Asia's shares rallied, as Japan's Nikkei 225 gained 1.8% to 10,960, and Hong Kong's Hang Seng closed up 0.4% to 10,843.