AP Business Writer

NEW YORK (AP) -- Taking no chances before first-quarter earnings reports begin, investors collected profits and sent stocks sharply lower Monday, erasing the gains the Dow Jones industrials enjoyed during their March rally.

Analysts said Wall Street was concerned that earnings might not be solid enough to justify the rally earlier this month. Low volume, which tends to exaggerate the market's losses or gains, was another factor as traders prepared to celebrate Passover and Easter.

The Dow closed down 146.00, or 1.4 percent, at 10,281.67, according to preliminary calculations. It was the Dow's lowest close since Feb. 28, when the average ended at 10,106.13.

Broader stock indicators also slipped. The Standard & Poor's 500 index lost 16.83, or 1.5 percent, closing at 1,131.87, and the Nasdaq composite index fell 38.90, or 1.5 percent, to 1,812.49.

Two difficult years on the market have taught many investors to play it safe -- and not leave themselves too exposed.

"People want earnings season to start so they can at least get some corrobration that things have turned," said Will Braman, chief investment officer with John Hancock Funds. "When there's this kind of uncertainty ... the natural reaction is to curl up in a ball in the fetal position and that's what the market is doing."

The losses appeared most concentrated in the tech sector, which has struggled in recent weeks on doubts it will turn around as quickly as hoped. IBM slipped $2.04 to $103.56, while Intel finished down 59 cents at $30. Both are Dow components.

The broader market also lagged. McDonald's fell 43 cents to $27.22, continuing a decline that began Friday on an earnings warning. Boeing lost 67 cents to $45.72.

Investors bid Philip Morris down $1.53, or 2.9 percent, to 51.96 after an Oregon jury ordered the company to pay $150 million in damages in the case of a woman who died of lung cancer after smoking low-tar cigarettes. The tobacco company plans an appeal.

Oil service stocks were one of the few bright spots as the sector rebounded from selling last week. Baker Hughes, which reduced its first-quarter outlook Friday, was up 49 cents at $37.24.

After a big rally early this month, stocks have pulled back in recent sessions as investors collected their winnings and tried to figure out what is next. Stock prices have risen sharply in some sectors on expectations that a turnaround is in progress. The problem is that although economic data is strengthening, business profits have yet to indicate the same.

First-quarter earnings season, which begins next month, could give investors a better idea of how business is doing. There are concerns, however, that stock prices have risen too much and that the recovery might not be robust enough to justify the high levels.

"More important than the numbers will be outlooks for earnings: What's going on, what CFOs and CEOs think business will look like for the rest of the year," said Matt Brown, head of equity management at Wilmington Trust. "The market is not cheap right now, so we really need something like this to get us going."

Investors are also nervous that the Federal Reserve will raise interest rates to prevent the economy from growing too quickly.

Also Monday, the National Association of Realtors reported that sales of previously owned homes fell slightly in February but still were the second highest monthly level on record. The news wasn't surprising, given low interest rates and the month's warm weather.

Declining issues led advancers more than 2 to 1 on the New York Stock Exchange. Volume came to 1.04 billion shares, compared with 1.22 billion Friday.

The Russell 2000 index dropped 6.00 to 496.39.

Overseas, Japan's Nikkei stock average slipped 0.7 percent. In Europe, Germany's DAX index and Britain's FT-SE 100 each lost 0.9 percent, while France's CAC-40 fell 0.3 percent.

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