Jittery investors looked past some strong earnings reports and fretted over the possibility of slowing corporate profit growth Monday, sending the Nasdaq composite index and Standard & Poor's 500 to their lowest closes for the year.

Beaten down in a month-long sell-off, the broad Standard & Poor's index posted its lowest close in seven months, and the technology-packed Nasdaq Composite Index notched its lowest close in nearly 10 months.

The technology-laced Nasdaq Composite Index (search) fell 10.07 points, or 0.54 percent, to 1,839.02, its lowest close since Oct. 2, 2003. The Dow Jones industrial average (search) was down 0.30 of a points, or unchanged on a percentage basis, at 9,961.92. The Standard & Poor's 500 Index (search) fell 2.13 points, or 0.20 percent, to 1,084.07, its lowest close since Dec. 17, 2003.

"This is much more than the usual summer doldrums. There's a message coming from the market, here," said Hugh Johnson, chief investment officer at First Albany Corp. "If I were to simplify that message, it's that the economy and earnings in the third and fourth quarter won't be as strong as we expected."

Drugmaker Pfizer Inc. (PFE) weighed on the market after Merck & Co. Inc. (MRK) and Schering-Plough Corp. (SGP) won U.S. approval on Friday to sell a 2-in-1 cholesterol pill called Vytorin, which competes with Pfizer's $10 billion-a-year Lipitor.

Quarterly scorecards from local telephone company BellSouth Corp. (BLS) and medical technology company Boston Scientific (BSX), showing an increase in profits, kicked off another heavy week of the earnings reporting season.

The solid earnings reports in the last few weeks, however, have been insufficient to overshadow fears that, in the quarters ahead, companies will have a tough time matching the strong earnings growth they had last year, analysts said.

"You're getting some corporate folks talking down third-quarter expectations," said Michael Vogelzang, president of Boston Advisors, Inc.

In addition, security fears and uncertainty about potential policy shifts ahead of a number of coming events, including a Federal Reserve (search) meeting in August and the Democratic and Republican conventions, were making investors reluctant to make big bets, said Jeffrey Kleintop, chief investment officer at PNC Advisors.

"The 'macro' clouds just need to dissipate a little bit," Kleintop added.

With more than half the companies that make up the S&P 500 reporting earnings so far, more than two-thirds have exceeded estimates for second-quarter earnings. But the strong profits have been overshadowed by lower outlooks for the rest of the year from a number of major corporations.

Even new strength in the housing sector was not enough to rouse buyers. Existing home sales rose 2.1 percent to a new record in June, according to the National Association of Realtors (search), as home buyers rushed to lock in low interest rates.

Trading on Wall Street remained lackluster as investors awaited earnings reports later in the week from Aetna Inc. (AET), Boeing Co. (BA), Exxon Mobil Corp. (XOM), Time Warner Inc. (TWX), and Verizon Communications (VZ). A spate of bargain hunting after last week's selloff also helped to keep stocks higher.

Pfizer fell 56 cents, or nearly 2 percent, to $31.74.

Wal-Mart Stores Inc. (WMT) weighed on the market after the world's biggest retailer stood by its forecast for a 2 percent to 4 percent increase in July sales at its U.S. stores open at least a year. It fell 51 cents, or 1 percent, to $52.65.

Microsoft Corp. (MSFT), the world's largest software company, helped cap losses in the market after Barron's reported the stock is attractively valued as the company prepares for further revenue gains and faster-growing profits. Microsoft rose 63 cents, or 2 percent, to $28.66.

Earnings at Mylan Labs (MYL) were flat compared to a year ago, and the company missed estimates by 2 cents per share. That, combined with the offer for King (KG), sent the stock down $3.00, or 16 percent, at $15.51. King surged $2.52, or 24 percent, to $12.89.

Citigroup (C) fell 50 cents to $43.81 after the financial giant was mentioned as a potential alternative buyer for Abbey National. Other financial stocks were mixed, with J.P. Morgan Chase & Co.  (JPM) down 6 cents at $36.47 and Bank of America Corp. (BAC) up 41 cents at $85.27.

BellSouth Corp. (BLS) announced a 5 percent rise in profits on flat revenues for the second quarter, beating Wall Street expectations by a penny. Its shares rose 91 cents, or more than 3 percent, to $26.81.

Boston Scientific (BSX) said quarterly net income nearly tripled, even with a $57 million after-tax charge related to the recall of its Taxus drug-coated stent. It rose $2.12, or 6 percent, to $35.71.

International Paper Co. (IP) rose 34 cents to $42.65 after exceeding estimates by 3 cents per share. The company said higher costs for materials and transportation could affect future earnings, however.

Trading was active, with about 1.4 billion shares changing hands on the New York Stock Exchange, and about 1.6 billion shares traded on Nasdaq.

The Russell 2000 index of smaller companies was down 5.74, or 1.1 percent, at 533.49.

Overseas, Japan's Nikkei stock average fell 0.3 percent. In Europe, France's CAC-40 slid 1 percent for the session, Britain's FTSE 100 closed down 0.9 percent and Germany's DAX index fell 1.2 percent in late trading.

Reuters and the Associated Press contributed to this report.