Stocks fell yesterday, the first day of the fourth quarter, as investors kept up their guard amid weak economic data, more profit warnings and apprehension over likely US retaliation for last month's deadly attacks.

"There are a lot of uncertainties that are going to remain with us for a while," said Mr Stanley Nabi, managing director at Credit Suisse First Boston, which oversees $110 billion. "But even if one assumes that we are going to have a rather deep recession, we are going to most likely be in some kind of recovery by the second quarter of next year."

Among those telling investors to expect less was computer security company RSA Security which said it would report a third-quarter loss rather than the profit forecast earlier as revenue falls short of already lowered expectations. The stock fell $2.56, or 19 per cent, to $10.90.

The prevailing gloom was largely unchanged by a positive report on US manufacturing -- news that typically would influence securities markets.