A late-day halt in trading of shares of United Airlines (NYSE:UAL - News) pending news as well as a warning from Dow component Caterpillar added fuel to a sell-off sparked by a terrorist bombing in the Philippines that killed at least 19, lingering uncertainty about Iraq, and a report that job-cuts expanded in February.

In addition, investment guru Warren Buffett chimed in with a proclamation that stock valuations still aren't enticing.

The blue-chip index also saw sharp weakness in two other components following a downgrade of number one carmaker General Motors to 'sell,' and an analyst note theorizing that Walt Disney Co. could warn about its second-quarter results.

Breadth was extremely negative with only Boeing out of the Dow's thirty components moving higher. The biggest drops were in Caterpillar (NYSE:CAT - News) , down more than 3 percent; General Motors (NYSE:GM - News) , over 5 percent; Walt Disney (NYSE:DIS - News) , losing more than.3 percent, and Home Depot (NYSE:HD - News) , sinking more than 4 percent.

Though not a blue chip, UAL also weighed the broader market after it said the IRS will permit the trustee for United Airlines' employee stock plan to sell 3.9 million more shares in a move that should protect a valuable tax credit. Shares of UAL tumbled 7 cents to 99 cents.

The DJIA scraped 7,750.81 at its low, a key level according to Bob Dickey, managing director and technical analyst at RBC Dain Rauscher. In a note to clients, Dickey said support for the blue chip barometer should be right around this level. The Dow has reversed direction from there on two occasions during the past few weeks.

Boeing's 1.5 percent advance came after the airplane manufacturer's stock plumbed a 52-week low of $26.91.

In the overall market, breadth was also negative with decliners outpacing advancers by a ratio of 20 to 11 on the Big Board, and 23 to 10 on the Nasdaq. Volume totaled 720 million shares on the New York Stock Exchange and 887 million shares on the Nasdaq.

Strategist blames weakness on technical factors

Steve Goldman, the chief market strategist at Weeden & Co., said that technical factors drove the action Tuesday. He added that he believes investors have already discounted a short war with Iraq, and that valuations are attractive.

When and if war breaks out, Goldman said he thinks stocks could rally following a pullback as part of an initial knee-jerk reaction.

"I don't know if it's so much the external news that's coming into the markets or the fact that we had close to a 6 percent rally at yesterday's highs, getting back to the higher end of the recent trading range," he said.

"We continue to be in this pattern of choppiness and getting to the upper end of the range with the backdrop of war, it would be pre-mature to take out a high at this point."

U.S. dollar slumps after Bank of Canada hikes rate

The dollar slumped 0.5 percent versus its Canadian counterpart to 1.4762, the lowest level seen since September 2000, after the Canada's central bank raised the target of its overnight interest rate by 0.25 percentage points. The buck slipped 0.2 percent against the euro to $1.0911. Meanwhile, the greenback rose 0.2 percent versus the Japanese yen at 117.74.

Gold futures got a lift from the weaker dollar. Crude oil futures pushed above $36 per barrel. Benchmark 10-year Treasury yields carved out fresh five-month lows.

Caterpillar's FY03 earnings outlook below consensus

The warning from component Caterpillar (NYSE:CAT - News) worsened an already weak showing for the Dow in midday trades.

The Peoria, Ill., industrial machinery firm indicated in its 2002 annual report that 2003 profits would fall short of expectations due to the global industry outlook, which has been hurt by geo-political uncertainty and a sluggish economy.

The maker of earth moving equipment said earnings should be 5 percent below its 2002 earnings of $2.30 a share, or approximately $2.19 a share. Analysts surveyed by Multex had been projecting profits of $2.26 a share, on average. Caterpillar expects revenue for the current year to approximate 2002's $20.15 billion, which is above analyst forecasts of $19.16 billion.

Soundview speculates on warning for Disney

Analyst Jordan Rohan at SoundView Technology sounded the alarm about Walt Disney (NYSE:DIS - News) , saying the media giant may have to warn of an earnings shortfall for its fiscal second quarter as terrorism fears, war jitters, weak consumer confidence and bad weather have negative impacted the company's entertainment parks division.

In a pre-market note to clients, Rohan said that he believes revenue for Disney's parks and resorts division will be down 5 percent from last year, and attendance will be down in the "high single-digit" percentage range.

He cut his fiscal second-quarter earnings estimate to 10 cents a share from 14 cents, but maintained his "neutral" rating and $17 price target.

Deutsche Bank says 'sell' GM, Ford

Weak sales figures for carmakers, which exacted a heavy toll on the Big Three on Monday, prompted a pre-market downgrade from Deutsche Bank.

Analyst Rod Lache lowered his assessment of Dow component General Motors (NYSE:GM - News) , Ford (NYSE:F - News) and auto parts makers Delphi (NYSE:DPH - News) and Visteon (NYSE:VC - News) to "sell" from "hold," citing increased pessimism on the risk to profitability for the auto industry over the next few years.

Merrill also weighed in on the auto stocks, saying that Monday's sales figures "increase the likelihood of production cuts/slow downs in the near future."

Buffett stays on the sidelines

Speaking in his annual letter to Berkshire Hathaway (AMEX:BRK - News) shareholders, Warren Buffett, the oracle of Omaha, said that his company "continues to do little in equities."

Fortune.com published parts of the letter.

"Despite three years of falling prices, which have significantly improved the attractiveness of common stocks, we still find very few that even mildly interest us," he said.

Pentagon sends more troops to Gulf

The Pentagon Monday ordered 60,000 additional troops to the Persian Gulf, bringing its total deployment in the area to roughly 250,000. The move came even as Iraq worked to destroy missiles in order to placate the international community.

In a letter to mark the Islamic New Year, Iraqi President Saddam Hussein vowed that his country would defeat any invaders. Of the U.S., Hussein lobbed the accusation that America is trying to turn Arabs into slaves, according to the A.P.

Job-cuts accelerate in February, Challenger Gray

Announced job reductions rose roughly 5 percent to 138,177 in February, according to a monthly tally from outplacement firm Challenger Gray & Christmas.

The data showed that the government and non-profit sector eliminated 41,559 jobs, the most of any sector.

Merrill sees trouble for financials; says techs are looking rich

There was little cause for optimism in a U.S. strategy update from Merrill Lynch as the firm painted dreary pictures for the financials, telecom services, technology and consumer discretionary sectors.

Of the financials, Merrill said that consumer lending continues to grow despite deteriorating credit quality, rising defaults and a weak employment picture. "Our conservative stock market view does not bode well for the sector," the firm told clients.

Merrill believes that talk of long-distance pricing power may be very short-lived in telecom services, and that the technology sector still appears "grossly overvalued."

The firm also said that it doubts the business models of consumer discretionary companies are prepared for a decrease in consumer purchasing power that may emerge from rising energy prices and weak employment statistics.

Greenspan doubts bubble in housing market

Consumer spending isn't likely to benefit as much from home equity cash outs this year as last, as mortgage rates stabilize and home price increases slow, Federal Reserve Chairman Alan Greenspan said Tuesday.

The Fed chief also expressed doubt the home market would go the way of the stock market - a bubble waiting to pop.

"It is, of course, possible for home prices to fall as they did in a couple of quarters in 1990," he said. "But any analogy to stock market pricing behavior and bubbles is a rather large stretch."

Homebuilders crumble following Lennar's report

Shares of homebuilders slumped after Lennar (NYSE:LEN - News) said late Monday that total first-quarter home orders rose a less-than-expected 8 percent to 6,712 units, hurt by a 14 percent decline in orders in its West region. Lennar's stock lost more than 6 percent.

A Banc of America analyst said he was looking for a 23 percent increase in orders from the company

Fellow homebuilders Centex (NYSE:CTX - News) , KB Home (NYSE:KBH - News) , D.R. Horton (NYSE:DHI - News) , and Pulte Homes (NYSE:PHM - News) all moved lower.

BJ's, Martha Stewart set weak tone for retailers

The retail sector saw some selling as BJ'S Wholesale Club and Martha Stewart Omnimedia issued cautious comments.

BJ's (NYSE:BJ - News) said it expects fiscal 2004 earnings to range from $1.25 to $1.35 a share, well below the average analyst estimate compiled by Multex of $1.72 a share. The stock plunged almost 19 percent.

The membership-based warehouse retailer said it would respond to a weak economy and increased competition by offering higher quality merchandise at even lower prices and by making investments in its business.

Shares of Martha Stewart Living Omnimedia (NYSE:MSO - News) gave back more than 4 percent after the home products maker and media company warned that it would lose 6 to 8 cents a share in the first quarter, well below Wall Street's consensus estimate for a profit of 3 cents per share.

The company believes the ongoing uncertainty related to the investigations into insider trading by CEO Martha Stewart is expected to continue to impact its businesses