In early trading, the Dow Jones industrial average was off 21.89 to 10,450.23 and the Nasdaq slipped 12 to 2,017.12.
A pair of chip-equipment executives disappointed investors with glum outlooks. Applied Materials CEO James Morgan said the chip sector was hitting a second phase of a downturn to knock the Nasdaq on Monday. After the market closed, Novellus CEO Richard Hill said "business conditions remain exceptionally weak."
The chip woes continued overseas. In Europe, the markets were rattled by news from consumer-electronics giant Philips, which said its semiconductor business remained weak and that a downturn is spreading. In Japan, the markets fell based on more worries from the chip sector.
Toss in expected earnings from Intel after the market closes Tuesday and you have a bunch of jittery investors. Analysts are expecting Intel to report a second quarter profit of 10 cents a share on sales of $6.29 billion.
Here are the stocks to watch for Tuesday:
Intel will report earnings and analysts are getting antsy. In fact, ABN Amro analyst Paul Leming cut the chipmaker to "reduce" from "hold." Leming said Intel could miss estimates and if it doesn't, it will be because the company will borrow from future quarter, putting third-quarter results at risk.
Novellus topped estimates in its second quarter by a penny, with earnings of $59.2 million, or 40 cents a share, on sales of $376.9 million. Novellus said business remained tough, but stuck with its earnings target of 24 cents a share in the third quarter, in line with First Call estimates.
Apple Computer will report its third-quarter earnings after the market closes. Analysts are expecting Apple to report a profit of 15 cents a share. Separately, Apple is hosting its Macworld Expo in New York City.
RealNetworks reports its second-quarter earnings. Analysts are expecting a profit of 2 cents a share, according to First Call. Investors will be tuned into the company's outlook. "We will look to see if the company provides guidance for more than just the third quarter, which could indicate a bottoming of its business prospects," said Adam Holiber, an analyst at Wedbush Morgan Securities.