Updated from 4:05 p.m. EDT

Stocks ended flat Tuesday, as some bullish sentiment offset news of a raised terror alert and a case of mad-cow disease in Canada.

After going as low as 8417 in late-afternoon trading, the Dow Jones Industrial Average ended the day down just 2 points at 8491. The Nasdaq, which lost nearly 3% Monday, dropped 1 point to 1491. The S&P 500 fell 1 point to 919.

Late in the session, the U.S. raised the terror-alert status one notch to orange, or "high risk," based on indications that terror groups are planning attacks in the U.S., or against U.S. interests abroad. Meanwhile, diplomats said more attacks in Saudi Arabia are "imminent," and the U.S. and Britain closed their embassies and consulates for a few days in response, the AP reported. The news sent stocks to lows of the day.

Separately, Canadian agriculture officials said they'd discovered the deadly mad-cow disease in a cow that died four months ago and was diagnosed Tuesday. The discovery reportedly prompted the U.S. Department of Agriculture to suspend the importing of Canadian beef, and immediately pressured shares of Dow component McDonald's ( MCD), which dropped 6.4%.

"Right now, the market is in a tug of war between the bulls, who think the momentum will carry us up simply because it's the line of least resistance," said Jim Awad, president and market analyst at Awad Asset Management. "The bears are saying the market has come so far, so fast, without ratification from the economy and that the rally has been speculative."

Awad said he gives the near-term edge to the bullish camp, especially after Monday's selloff came on such low volume, showing some lack of conviction, while Tuesday's action showed the upward momentum was still there. That said, Awad cautioned that the markets may finally get "a reality check" once companies start warning about second-quarter earnings in mid-to-late June.

The weakening dollar also drew some attention. On Tuesday, the dollar had held its ground against the euro in early trading but slipped later in the day, with the euro trading at $1.1712, up from $1.1657 late Monday. On Monday, the dollar hit four-year lows after Treasury Secretary John Snow made comments that seemed to suggest an easing of the U.S. government's strong dollar policy.

With few economic releases Tuesday, outside of the Treasury Budget, all eyes were on corporate earnings, especially blue-chip Home Depot ( HD). The world's largest home-improvement retailer said first-quarter net earnings increased 8% to $907 million, or 39 cents per share, beating estimates by 2 cents. The company also affirmed its sales and earnings guidance for fiscal 2003. Shares were up 9.2% to $30.66, helping push all retailers higher, with the S&P Retailers up 2%.

The results come after Home Depot's largest rival, Lowe's ( LOW), reported stronger-than-expected earnings despite disappointing same-store sales. Lowe's, which dropped 9% in Monday trading, was off another 3.2% to $39.02.

In other blue-chip news, investors will get results after the close from computer maker Hewlett-Packard ( HPQ), which is expected to report a rise in fiscal second-quarter net profit. Ahead of the release, H-P was up 1.1% to $17.06.

Also, Intel ( INTC) was removed from Goldman Sachs' current investment list, but the brokerage reiterated its outperform rating. And American Express ( AXP) was downgraded to market perform at Friedman Billings Ramsey. Intel was down a penny to $18.66, while Amex was off two cents to $39.67.

Elsewhere in retail earnings, Staples ( SPLS) reported a decline in first-quarter net income to 5 cents a share from 20 cents a year earlier, due to an accounting charge in the latest quarter. Excluding the item, the office-supplies retailer beat estimates by a penny and said it will meet expectations for second-quarter results. Shares were down 4.3% to $18.90.

On retail's high end, Saks ( SKS) reported a drop in earnings because of a 3.4% decline in same-store sales amid weak demand. On the lower end, BJ's Wholesale ( BJ) beat earnings expectations by 2 cents, while Big Lots ( BLI) beat earnings estimates by a penny. Saks was up 1.5%, BJ's was down 6.2% and Big Lots was up 6.7%.

Agilent Technologies ( A), a maker of electronics and testing equipment, said late Monday that it narrowed its loss in the fiscal second quarter, while reiterating its outlook for fiscal third-quarter results. Shares were up 3.4% to $16.04.

Banc of America commented on the integrated oil sector, raising its rating on the industry to market weight from underweight, saying ExxonMobil ( XOM), Royal Dutch ( RD), ConocoPhillips ( COP) and ChevronTexaco ( CVX) seemed cheap. Royal Dutch and ExxonMobil were up 1.2% and 0.7%, respectively.

A federal judge turned down a request to dismiss a shareholder lawsuit against Martha Stewart and her company Martha Stewart Living ( MSO) that was related to alleged insider trading. A pretrial hearing was scheduled for November. Shares were down 2.5% to $10.35.

In other corporate news, MCI, formerly bankrupt phone company WorldCom ( MCWEQ), cleared a hurdle from its path to recovery by agreeing to pay a record $500 million fine in a settlement with stock market regulators.

Overseas markets were mostly higher, with London's FTSE 100 ending up 0.8% at 3972 and Germany's Xetra DAX closing down 0.4% at 2839. In Asia, Japan's Nikkei closed 0.3% higher at 8059, while Hong Kong's Hang Seng lost 0.4% to 9050.

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