NEW YORK – The Dow Jones industrials had risen as much as 113 points as investors shrugged off an earnings warning from American Express to take advantage of cheaper stock prices. But the overall market fell after President Bush demanded China arrange the "prompt and safe return" of 24 U.S. crew members and their spy plane that made an emergency landing on the Chinese island of Hainan Sunday.
In midafternoon trading, the Dow was down 136.31 at 9,742.47.
Broader indicators also fell. The Nasdaq composite index tumbled 56.54 to 1,783.72, while the Standard & Poor's 500 index was down 15.85 at 1,144.48.
Before Bush's comments, investors were bargain hunting and still trading cautiously on the belief that the economy and earnings will remain weak for the foreseeable future. But with the market, extremely unsettled after weeks of volatility, investors began selling, not wanting to take any chances with more uncertainty confronting them.
A litany of earnings warnings and layoff announcements has sent blue chips sharply downward in the past two weeks — with the Dow briefly landing in bear market territory, marked by a decline of 20 percent from its high of 11,722.98 registered on Jan. 14, 2000.
The latest big name to issue a first-quarter profit warning, American Express, tumbled $2.02 to $39.28.
The Dow's swing from sharp advance to sharp decline "shows the nervousness of the market," said Arthur Hogan, chief market analysts at Jefferies & Co. Monday's sudden downturn, he said, doesn't bode well as companies prepare to make their first-quarter earnings announcements.
"We are going to have a lot more of this, a lot of volatility in the coming weeks with more American Express-type announcements," Hogan said. "We are still nervous about how much the economy has slowed and how adversely it is going to affect earnings."
Other stocks that suffered Monday included those that have slipped recently on their own bad news.
Procter & Gamble, which announced last month it was slashing 9,600 jobs worldwide, fell $1.02 to $61.58. Walt Disney, which announced 4,000 job cuts last week, was down 44 cents at $28.16.
Earlier in Monday's session, the market did take some encouragement from news that the manufacturing sector showed signs of easing its slowdown in March. The National Association of Purchasing Management said its index of business activity rose to 43.1 from 41.9 in February.
Declining issues outnumbered advancers 3 to 2 on the New York Stock Exchange where volume was 745.94 million shares, compared with 742.77 million at the same point Friday.
The Russell 2000 index, which measures the performance of smaller companies stocks, was down 9.07 at 441.46.
Overseas markets were mixed Monday. Japan's Nikkei stock average closed down 0.5 percent.
In Europe, Germany's DAX index fell 1.4 percent, Britain's FTS
Get all the stories you need-to-know from the most powerful name in news delivered first thing every morning to your inbox