"Emotions are running high right now, and a quick move to the downside can easily be replaced a move to the upside and vice versa," said Charles G. Crane, strategist for Victory SBSF Capital Management. "People are shooting first and asking questions later."

The Dow closed down 234.82, or 2.9 percent, at 7,784.44, according to preliminary calculations, its third straight triple-digit finish and its lowest close since it reached 7,731.90 on Oct. 8, 1998. It was also the average's first close below 8,000 since Oct. 14, 1998, when it finished at 7,968.80.

The Dow has lost 625.05 points in the last two sessions.

Broader stock indicators also retreated. The Nasdaq composite index was down 36.60, or 2.8 percent, at 1,282.55, and the broader Standard & Poor's 500 index was off 27.92, or 3.3 percent, at 819.83.

The Nasdaq last closed lower on May 1, 1997, when it was at 1270.50. The last time the S&P closed lower was May 7, 1997, when it stood at 815.62.

The volatility came a day after WorldCom filed for Chapter 11 bankruptcy protection, a move that had been widely expected following the telecommunications company's disclosure nearly a month ago of deceptive accounting practices. The stock rose 5 cents to 14 cents after WorldCom's chief executive said he was optimistic the company would emerge from court protection within 12 months.

Investors, fed up with corporate ethics and accounting scandals, are staying away from the market ­ or even pulling their money out and shifting into investments perceived as less risky, such as real estate or bonds.

There were losses among WorldCom's creditors. J.P. Morgan Chase fell $1.58, or 6 percent, to $24.52, while Citigroup dropped $3.96, or 11 percent, to $32.04.

Citigroup was also hurt by a Wall Street Journal report that the National Association of Securities Dealers was preparing a case against its Salomon Smith Barney unit and research analyst Jack Grubman for alleged security rules violations.

Other stocks with steep declines included Microsoft, which tumbled $3.27, or 6.6 percent, to $46.29, and IBM, which slid $3.50, or 4.9 percent, to $68.50.

Energy issues fell, too. ExxonMobil slid $2.13, or 6.6 percent, to $30.27, while Williams Cos. fell 61 percent, down $3.15 to $2.01, on news the company expects a significant quarterly loss and planned to slash its dividend.

"The market is cautious, and very skeptical right now," said Subodh Kumar, chief investment strategist for CIBC World Markets. "People are focused in their minds on whether the earnings being reported are reliable or not. And when you hear things like big bankruptcies, people tend to get nervous."

The few companies that did manage sharp gains indicated or had news suggesting that higher stock prices might be ahead.

3M advanced 12 cents to $109 after increasing its earnings forecast for the second time this year, following the release of second-quarter earnings that more than doubled on higher sales and improved efficiency.

And Procter & Gamble advanced $3.37 to $77.83 after the personal care products company said it is stepping up its stock buyback program, but remains confident about its business. UBS Warburg also upgraded the stock from "buy" to "strong buy."

Also today, President Bush again expressed confidence that the economy was improving, and said legislation moving through Congress should help increase investors' faith in the stocks.

Stocks have fallen steadily since May 17, the last time the three major indexes posted a weekly advance.

On Friday, the Dow suffered its seventh-largest point drop, falling 390.23, to 8,019.26, a loss of

4.6 percent.The Nasdaq fell by a smaller percentage, 2.8 percent, dropping 37.80 to 1,319.15, and the S&P 500 lost 33.80, or 3.8 percent, to 847.76.

Declining issues led advancers 4 to 1 on the New York Stock Exchange. Volume came to 2.14 billion shares.