The markets are taking a heavy thumping today, driven lower by a mix of bad news at market giant Nortel and geopolitical events. At midday, the S&P/TSX index has dropped 137 points to sit at 8,455.

Tech bellwether Nortel is taking a huge hit on word that a couple of executives have been suspended as it completes an audit and contemplates a restatement.

Apart from Nortel, the market is generally weaker after the surprise results of the Spanish elections. Talk that last week’s bombing may have been the work of Islamic terrorists apparently pushed Spaniards to oust its ruling party. Traders are worried about the effects of this rebuke of U.S. actions in the Middle East, and the potential for further fallout in Europe and the U.S.

In economic news, the action is mixed. Canadian motor vehicles sales rebounded. As well, the U.S. reported higher capacity utilization numbers and stronger industrial production data. However, the Empire State purchasing managers’ index fell to 25.3 from 42.1 in February.

Traders are also awaiting a Fed meeting tomorrow. They are not expecting a change to interest rates, but are curious about the content of the Fed’s policy statement.

Toronto volume is heavy today with 165 million shares, with selling action trumping the buying by a margin of 10 to three. Market breadth is also negative, as losers outnumber winners two to one.

The Nortel news is really weighing on the tech group, taking it down 4.5%. Miners have dropped 3.4%, and there is weakness in consumer discretionary stocks, health care, industrials and materials. Only energy stocks are making a small gain.

Nortel is leading the way lower, dropping 12% on heavy volume of 45.6 million shares on news that it has appointed William Kerr as chief financial officer and MaryAnne Pahapill as controller, on an interim basis. Douglas Beatty and Michael Gollogly, the current CFO and controller, respectively, have been placed on paid leave of absence pending completion of the independent review being undertaken by the firm’s audit committee.

Fears about the outcome of this audit are hammering the stock. And, they are spilling over to names such as BCE, Cognos, Mitec Telecom and Celestica.

The bigger fears about terrorism and political risk are hurting the overall outlook stocks, knocking down such names as Inco, Teck, Alcan, Dofasco, Barrick, TVI Pacific, Ivanhoe Mines and EnCana.

Traders are also giving up on other names with recent trouble, such as Canadian Superior Energy. It is down 11%. Hudson’s Bay is 4.6% lower.

The big banks are also being caught in the nervous selling, and Nortel exposure. Bank of Montreal is dropping 2%, Manulife is down 1.2%, and there is weakness in TD Bank, CIBC and Scotia. Royal Bank is holding up, almost flat at midday, after reporting a $1.6 billion RRSP season total.

There are some names making gains today, though. Xantrex Technology is up strongly on news that it has entered into an underwriting agreement and has filed its final prospectus for an initial public offering of 3,725,000 common shares at $18 per share. Closing is scheduled to take place on March 19.

Wheaton River Minerals is seeing lots of buying on news that it has posted record net earnings of US$27.8 million for its latest quarter, and US$57.7 million for the year. Net earnings for both the fourth quarter and the full year increased by more than 900% compared with 2002.

There is also some buying in NA Palladium, Southern Cross, and Northern Orion Resources.

In business news, it was reported that CN Rail has reached a tentative contract agreement with the Canadian Auto Workers, which may end its strike.

In New York, political concerns and terror fears, are helping to whack the market. The Dow Jones industrial average has dropped 126 points at midday to 10,114. The tech-heavy Nasdaq composite index is 37 points lower at 1948.

The S&P/TSX Venture index is also down today, dropping 12 points to 1,851. Volume is on the light side at 36.3 million shares, led by Oilexco Inc. It’s up 34¢ to $2.37 in heavy trading of 2.2 million shares, on news that it’s starting a production test of a third North Sea well.