April 28 (Bloomberg) -- U.S. stocks fell as reports of increased fighting in Iraq and the prospect of higher interest rates overshadowed better-than-expected corporate profits.

Nortel Networks Corp. plunged after North America's largest maker of telephone equipment fired its chief executive officer and delayed its earnings announcement. Shares of competitor Lucent Technologies Inc. dropped. The Standard & Poor's 500 Index has declined 2.3 percent since its 23-month high on Feb. 11.

``We have had a little bit of a sloppy market because aside from the earnings picture, there are several other things going on: the interest rate picture, the international situation,'' said Michelle Clayman, who oversees $3 billion as chief investment officer at New Amsterdam Partners in New York.

The S&P 500 lost 7.55, or 0.7 percent, to 1130.56 as of 10:48 a.m. in New York. The Dow Jones Industrial Average dropped 70.69, or 0.7 percent, to 10,408.84. The Nasdaq Composite Index shed 18.41, or 0.9 percent, to 2014.12.

Almost three stocks fell for every one that rose on the New York Stock Exchange. Some 386 million shares changed hands on the Big Board, 5.6 percent less than the same time a week ago.

U.S. aircraft attacked targets in northern Fallujah, Iraq last night and helicopter gunships continued to strike today. The U.S. and U.K. closed embassies in Syria following explosions and gunfire there yesterday.

`Nobody Knows'

``Right now the biggest concern on investors' minds is the Iraq situation,'' said James Maguire, a specialist at LaBranche & Co. ``Nobody knows where things are going from here and the market hates uncertainty.''

Concern that the Federal Reserve may soon raise interest rates to cool the economy and fend off inflation also sent stocks lower. A government report due tomorrow may show the economy expanded at a 5 percent annual rate last quarter, according to the median of 74 forecasts gathered by Bloomberg news.

Nortel sank $1.54, or 27 percent, to $4.10. The company said it fired Chief Executive Officer Frank Dunn and will delay its first-quarter earnings report because of an accounting review. Nortel said it might reduce reported 2003 earnings by 50 percent.

Lucent lost 21 cents, or 5.8 percent, to $3.40.

Newmont Mining Corp., the world's biggest gold producer, dropped $1.54 to $38.65, a six-month low. Excluding some accounting charges related to an Indonesian mine, the company posted a first-quarter profit of 30 cents a share. On that basis, Newmont had been expected to earn 34 cents based on the mean estimate of 15 analysts surveyed by Thomson Financial.

Raw-Materials Shares

Shares of companies that produce raw materials declined on concern that growth in China will slow, curbing demand. China's efforts to cool expansion in the steel, cement and other heavy industries are working, Wu Xiaoling, vice governor of the People's Bank of China said in an interview. China's economy, the world's sixth-biggest, grew 9.7 percent in the first quarter, more than double the rate of expansion in the U.S. and the fastest-growing of the Group of Seven member nations.

Freeport McMoRan Copper & Gold Inc. slumped $1.90 to $29.90, Alcoa Inc. lost $1.27 to $31.03 and U.S. Steel Corp. dropped $1.93 to $31.45. An index of raw-materials shares lost 2.3 percent, the biggest drop in the S&P 500's 10 industry groups. The raw-materials index surged 22 percent in the fourth quarter, leading gains in the benchmark.

RF Micro Devices Inc. shed 63 cents to $7.84. The maker of chips for Nokia Oyj and other mobile-phone companies forecast sales this quarter of as much as $171.6 million, less than the $172.2 million analysts expected.

Comcast Gains

Comcast Corp., the world's largest cable-television operator, climbed 87 cents to $30.84 after the company withdrew its $54.1 billion unsolicited bid for Walt Disney Co. Disney, whose board had rejected Comcast's offer as too low, shed 39 cents to $23.79.

Separately, Comcast reported first-quarter net income of $65 million, or 3 cents a share, compared with a loss from continuing operations of $355 million, or 16 cents, a year earlier. Revenue rose 9.9 percent to $4.91 billion.

About 41 companies in the benchmark, including Time Warner Inc., were scheduled to report today. S&P 500 members boosted first-quarter profit by 24.3 percent, on average, according to a Thomson survey of analysts. As of yesterday, 312 of the benchmark's companies have reported results and 78 percent have exceeded the average forecast, Thomson said.

Wyeth Drops

Wyeth shed 82 cents to $38.45. The company must pay $1.013 billion to the family of a Texas woman who died from a lung disease after taking the company's weight-loss pills, a jury ruled. Wyeth has set aside $16.6 billion to resolve suits over damages caused by fen-phen diet combinations.

Network Associates Inc., which is changing its name to McAfee Inc. to focus on anti-virus software, dropped $2.25, or 12 percent, to $15.85. The company said sales this quarter will fall short of analysts' forecasts.

Bristol-Myers Squibb Co. climbed 23 cents to $24.95. The maker of the Taxol cancer drug said it earned, excluding some items, 41 cents a share in the first quarter, 2 cents more than the average estimate in a Thomson survey. Sales in the period were also higher than analysts expected.

McDonald's Corp. added 74 cents, or 2.7 percent, to $27.94, for the biggest advance in the Dow. The world's largest chain of hamburger restaurants said first-quarter revenue rose 16 percent to $4.4 billion, beating the average $4.27 billion estimate of 10 analysts polled by Thomson.

Southern Co. added 15 cents to $29.48. The second-largest U.S. utility owner by market value said first-quarter net income rose to $331 million, or 45 cents a share. Analysts had forecast profit of 37 cents, according to Thomson.

To contact the reporter on this story: John Melloy in New York at jmelloy@bloomberg.net.

Last Updated: April 28, 2004 10:49 EDT