Updated from 4:07 p.m. EDT A disappointing consumer confidence reading, cautionary remarks from Intel's ( INTC) CEO and downgrades on a handful of retail and financial stocks, left the major averages dripping in red ink Tuesday. Both the S&P 500 and the Nasdaq ended close to their session lows, and the Dow Jones Industrial Average finished down 94.60 points, or 1.1%, to 8824.41.The S&P lost 13.13 points, or 1.4%, to 934.82, and Nasdaq dropped 43.96 points, or 3.2%, to 1347.78. "We're in an illiquid market, and the bears won out," said Peter Blatchford, trader at Miller Tabak. Volume on the New York Stock Exchange reached 1.24 billion shares, while on the Nasdaq, 1.5 billion shares changed hands. Stocks started out on an optimistic note Tuesday as investors reacted positively to a report on durable goods orders , which showed an 8.7% rise in July -- the largest gain since October 2001 and well above economists' expectations for a 1.4% increase. In June, durable goods orders fell a revised 4.5%. Still, the ebullience didn't last long, and when it became clear that consumer confidence had fallen in August, stocks began to sell off. According to a survey from the Conference Board, the consumer confidence index slipped to 93.5 in August, down from 97.4 last month and well below forecasts for a reading of 97.0. Traders said investors were focusing more on the negative consumer data because any deterioration on that front is much more significant than any signs of improvement in capital goods. After all, consumer spending accounts for roughly two-thirds of gross domestic product . "Durable goods are very volatile so I think people are giving more weight to the consumer numbers," said Tom Schrader, a trader at Legg Mason. "We've had a nice rally for three or four weeks, and I think we're short-term overbought." Lynn Franco, director of the Conference Board's consumer research center, said the sequential drop in the present situation index is a strong signal that business conditions have yet to improve, and she said that consumer spending isn't likely to gain momentum any time soon. Still, several economists believe that the link between what consumers say and what they actually do is often tenuous. Consumer expectations dropped to 94.5 from 96.1 in July, signaling "a continued, but slow, economic expansion," Franco said. The present situation index fell to 92.0 from 99.4 last month. Inside the market, semiconductor stocks saw the biggest losses, down about 6% on average after Intel's CEO Craig Barrett told Reuters that the chipmaker hasn't seen "much improvement in the computing environment because companies are not investing." He added that he doesn't know when that will turn around, but said Intel he still expects modest sequential growth in the third quarter. Intel shed 5% to $17.18 while rival Advanced Micro Devices ( AMD) was down 6% to $9.09. Hardware stocks also retreated, with Hewlett-Packard ( HPQ) down 4% to $14.21 ahead of its earnings report. After the bell, the computer hardware maker reported a third-quarter profit of 14 cents a share, in line with the estimates. However, sales came in at $16.5 billion, which was about $200 million below analysts' expectations. Although tech stocks were seeing the brunt of the selling, retail issues were lower after Merrill Lynch cut its ratings on the group and sliced expectations for the rest of 2002, citing concerns that consumers are spending more conservatively than anticipated. Merrill also said that consumers "will not be in the mood to shop" over the Sept. 11 anniversary. Barnes & Noble ( BKS), Target ( TGT) and Ann Taylor ( ANN) were among the stocks that saw their ratings lowered. In the financial sector, Dow component Citigroup ( C) fell 0.6% to $34.20 after its brokerage unit Salomon Smith Barney admitted to giving thousands of shares of hot initial public offerings to WorldCom executives during the late 1990s. Separately, UBS Warburg cut its earnings estimates on Merrill ( MER), Lehman Brothers ( LEH), Charles Schwab ( SCH) and Morgan Stanley ( MWD). Analyst Diane Glossman cited weakness in the fixed-income market for the estimate reductions. Among other stocks: Shares of HealthSouth ( HRC) plunged 42% to $6.90 after the surgical rehabilitation provider said changes in government reimbursement schedules would cut $175 million out of its yearly EBITDA. The company also said it plans to spin off its surgery care centers to shield them from the reimbursement issues and named Richard Scrushy, its chief executive, to head the new unit. Luxury homebuilder Toll Brothers ( TOL) recorded a 10% drop in third-quarter earnings Tuesday as a slowdown in orders late last year and a decline in contracts following Sept. 11 hurt profits. The company, headquartered in Huntingdon Valley, Pa., said it earned $53.5 million, or 70 cents a share, compared with $59.4 million, or 77 cents a share, in the year-ago period. Analysts were expecting the company to post a net profit of 65 cents a share. Revenue for the quarter dipped slightly to $580.7 million from $584.1 million last year. Shares were recently down a nickel at $26.70. Surfwear merchant Quiksilver ( ZQK) raised its third-quarter earnings forecast, citing increased revenue from its diversified product lines and stringent cost-cutting measures. The Huntington Beach, Calif.-based retailer said it now sees a net profit of 32 cents to 33 cents a share, which would be relatively flat with year-ago levels. Analysts, on average, were expecting the company to earn 29 cents a share, according to a poll conducted by First Call/Thomson Financial. Revenue for the quarter is expected to come in at $170 million to $173 million, ahead of the consensus estimate of $167.8 million. Quiksilver also said it remains on pace to earn at least $1.42 a share on revenue of $685 million to $690 million, compared with $1.17 a share on $615.5 million last year. Analysts are projecting a year-end profit of $1.40 a share. The company's shares were up 2.2% to $21.15. Regis Corp.'s ( RGIS) fourth-quarter EPS rose 22%, beating analysts' estimates by 2 cents. The company, which opened more than 2,000 new stores in 2002, said its 1,000-strong Wal-Mart ( WMT) Supercenter-based SmartStyle salons contributed heavily to its performance. Excluding a one-time tax benefit of $1.8 million, or 4 cents a share, the company said it earned $20.4 million, or 45 cents a share, compared with $15.8 million, or 37 cents a share, in the year-ago quarter. Revenue was up 11% to a record $384.4 million vs. $345.9 million from last year. Shares of Regis were up 0.8% to $25.50. Telecommunications contractor Dycom ( DY) posted a wider-than-expected loss in the fourth quarter because of "customer difficulties and bankruptcies" that led to various charges. The company reported a loss of $56.8 million, or $1.19 a share, compared with earnings of $13.6 million, or 32 cents a share, a year ago. The charges total $59.9 million, or $1.25 a share. Excluding charges, Dycom earned $3.0 million, or 6 cents a share, an 81.3% decrease over last year's comparable quarter before charges. The results came in 4 cents lower than analysts' estimates. Dycom was up 1.3% to $11.09 around midday.