The downturn, which extended a decline that began Friday, wasn't surprising given how far stock prices have come recently, with the Dow Jones industrials posting eight-straight weekly wins and the broader market advancing for seven of the past eight weeks.

While investors are growing more confident about the economy and earnings, they are expected to cash in some profits, especially amid the uncertainty over whether there will be a war with Iraq.

"At these levels, the market is in pullback mode," said Gary Kaltbaum, market technician for Investors' Edge Partners in Orlando, Fla.

The Dow closed down 119.64, or 1.4 percent, at 8,742.93, according to preliminary calculations. The Dow has lost 188.75 over the past three sessions.

The broader market was also lower. The Nasdaq composite index fell 35.82, or 2.4 percent, to 1,448.96. The Standard & Poor's 500 index declined 13.78, or 1.5 percent, to 920.75.

Investors sold off AOL, down $2.36 at $14.21, after the company affirmed its 2002 earnings forecast for its America Online unit but warned of sinking advertising revenues for the year ahead.

Wall Street's losers also included companies due to issue earnings outlooks later in the week, a sign that investors were feeling skittish about the health of other big companies. Merck dropped $1.13 to $58.82 ahead of its 2003 forecast on Thursday. Intel fell 74 cents to $20.31 ahead of Thursday's mid-quarter update. Both are Dow industrials.

Brokerage downgrades hurt other issues. Supermarket operator Albertson's fell $1.31, to $22.26 on a downgrade from J.P. Morgan, while Marriott International declined $1.22 to $34.47 on a downgrade from Deutsche Securities.

Declining issues outpaced advancers more than 4 to 3 on the New York Stock Exchange where trading volume was light.

The Russell 2000 index, the barometer of smaller company stocks, was down 7.70, or 1.9 percent, at 400.84.