"The United Airlines news has got the market a little spooked," said Todd Clark, head of listed equity trading at Wells Fargo Securities. "We're seeing weakness in the financial stocks, part of it due to their exposure to United Airlines bonds."

"Retail sales also are not great, so those are the two factors weighing on the market," he said.

The Dow dropped 114.57, or 1.3 percent, to close at 8,623.28, for a five-day loss of 308 points. The last time blue-chip stocks dropped five straight days was during the period ended July 12.

The broader market also fell. The Nasdaq composite index fell 19.64, or 1.4 percent, to 1,410.71. The Standard & Poor's 500 index declined 11.03, or 1.2 percent, to 906.55.

UAL plunged $2.12, or 68 percent, to $1 after the federal government rejected United Airlines' request for a $1.8 billion loan guarantee. The decision hurt the company's efforts to avoid Chapter 11 bankruptcy and prompted Dow Jones & Co. to pull UAL from the Dow Jones Transportation Average.

Citigroup, the nation's biggest banking company, dropped 71 cents to $37.14.

Retailers also took a hit after reporting only modest November sales gains. Discounter Wal-Mart fell $1.42 to $53.02, while Gap dropped 59 cents to $15.59.

Analysts say the market's recent declines are not particularly worrisome following eight weeks of blue-chip gains. They believe hopes for a year-end rally should push the market higher, although concerns about corporate earnings and a war with Iraq could pressure stocks.

Thursday's trading also was light as a snowstorm swept through the Northeast; low volume tends to exacerbate price swings.

"October and November were such strong months, it's not surprising that in December we pulled back a little bit," said Mike Kayes, chief investment officer at Eastover Capital in Charlotte, N.C.

"The fact that we haven't gone down a lot early on is encouraging. I think if we can get the overbought situation satisfied in this recent pullback, we might start taking off again," he said.

Investors largely ignored a Labor Department report Thursday showing that new claims for unemployment benefits fell last week by a seasonally adjusted 13,000 to 355,000. It was the lowest level since February 2001, offering hope to workers as they move into the holiday shopping season.

Gateway dropped 70 cents to $3.42 after the computer company cautioned that its fourth-quarter earnings target is at risk if it doesn't have strong sales this month.

Intel fell 78 cents to $18.96 ahead of its mid-quarter earnings update due out later Thursday.

Gainers included Advanced Micro Devices, which rose 40 cents to $8.25, after the maker of computer processors raised its fourth-quarter outlook, citing strong sales.

Declining issues outnumbered advancers 3 to 2 on the New York Stock Exchange.

The Russell 2000 index, a barometer of smaller company stocks, fell 3.08, or 0.8 percent, to 394.45.