Market watchers were hesitant to buy stocks Monday ahead of the two-day meeting of the Federal Open Market Committee, at which the U.S. central bank is expected to cut interest rates.

Traders were mainly focused on Tenet Healthcare Corp.'s (THC: chart) earnings warning. As a result, shares lost more than a quarter of its value, giving up 26%.

The hospital operator, which has been under a government probe for its billing practices, said that its second quarter and full-year results would come in significantly below analysts' current projections.

The company blamed the downward revision to industry issues and company-specific issues, such as lower-than-expected revenue trends, increasing cost pressures and past pricing practices 'that have placed the company in an especially difficult position.'

The company did not provide a specific guidance for the second quarter, but said that results would be shy of Wall Street expectations. Analysts polled by Thomson First Call were looking for a profit of 34 cents a share for the second quarter.

Tenet, second only to HCA Inc. (HCA: chart), announced that earnings from continuing operations for the first two months of the second quarter amounted to 2 cents a share, reflecting charges totaling 15 cents a share from severance and associated benefit costs and a change in the discount rate used to value unfunded retirement plan and malpractice liabilities.

The Santa Barbara, Calif.-based company said that it expects profit for the second half of the year to range between 40 cents a share and 50 cents a share, which fell short of analysts' mean estimate of 70 cents a share.

For the 12 months beginning July 1, Tenet sees earnings coming at between 80 cents and $1.00 a share – and would thus miss analysts' average forecast for a profit of $1.40 a share.

Tenet shares plunged 4.22 to 12.01 after the announcement in regular trading on the New York Stock Exchange (NYSE).

Before market open Monday, retailer Walgreen Co. (WAG: chart) delivered a rise of 14.3% in its third-quarter earnings as strong prescription drug sales and a gain from legal settlements managed to neutralize the negative impact of rising costs of keeping more stores open 24 hours a day.

The No. 1 U.S. drugstore chain had a net income of $296.1 million, or 29 cents a share, meeting analysts' expectations. The latest results included an accounting charge related to inventory of $9 million and a $12 million litigation settlement credit this year.

In the year-ago quarter, the Deerfield, Ill.-based company posted a profit of $259 million, or 25 cents a share. Figures for that period included an inventory accounting charge of $22.6 million.

Sales for the quarter May 31, 2003 rose 12.6% to $8.32 billion from $7.4 billion. Same-store sales, or sales at stores open at least a year, was up 8.2%.

Prescriptions, which accounted for 63% of sales, jumped 15.5%. Same-store prescription sales rose 11.5% in the quarter.

Walgreen also noted that third-quarter pharmacy margins faced a difficult comparison to the prior-year period, when several blockbuster generic drugs boosted profit margins.

Looking ahead, Walgreen expects the coming years to be a high-growth period. The company plans to open about 425 stores this fiscal year and operate 7,000 stores by 2010. At the end of May, the company operated 4,050 drugstores in 43 states and Puerto Rico.

Shares sagged 2.46, or 7.63%, to 29.79 in regular trading on the NYSE.

Citing slowing sales and higher-than-expected costs, label maker Avery Dennison Corp. (AVY: chart) trimmed its outlook for the second quarter.

The Pasadena, Calif.-based company now expects second-quarter earnings of 68 cents to 72 cents a share, down from a prior forecast of 77 cents to 82 cents a share. Analysts had pegged it to earn 79 cents a share.

Revenue for the quarter is estimated to total between $1.20 billion and $1.23 billion - up 14% to 16% from a year earlier.