Stocks fell yesterday as an earnings warning from financial services giant American Express Co and mounting tension between Washington and Beijing over a downed US Navy spy plane provided investors with yet another reason to sell.

"Clearly, the American-Chinese standoff is not a positive signal for the market," said Mr Bernard Horn, portfolio manager with Polaris Capital Management, which oversees $90 million.

A rally in the blue-chip Dow unravelled after President George W. Bush demanded in a televised statement that China grant immediate access to the crew of the plane. But the stock market was already on pins and needles after American Express, one of the Dow 30 stocks, warned of disappointing earnings just as the first-quarter earnings reporting period heats up. American Express shares fell nearly 4 per cent, or $1.59, to $39.71.