"The market was ripe for profit taking. We had a very good week last week, a very encouraging week. So traders probably jumped on the Cheney thing as a triggering event, another reason to sell. And the economic news, although (the economy) is healthy, it is not as robust as people would hope," said Bill Barker, investment strategy consultant at RBC Dain Rauscher in Dallas.

The Dow Jones industrial average closed down 123.58, or 1.2 percent at 10,229.50, according to preliminary calculations. But the Dow hung onto much of its advance from last week when it climbed 413.16, or 4.2 percent.

The broader market also pulled back. The Nasdaq composite index fell 39.80, or 2.3 percent, to 1,701.59, having on Friday claimed a five-session winning streak, its first since early October. The Nasdaq ended the week up 140.54, or 8.8 percent. It was the Nasdaq's biggest weekly percentage gain since the week that ended April 20, 2001, when it rose 10.3 percent.

The Standard & Poor's 500 index dropped 14.71, or 1.3 percent, to 1,091.88, after rising 51.60, or 4.9 percent, last week.

The selling was intensified by fears of more terror attacks and economic news.

Today, FBI Director Robert Mueller said suicide bombers like those who have attacked stores, restaurants and other public places in Israel eventually will hit the United States. And Cheney told "Fox News Sunday" there have been hints of future terrorist attacks that must be taken seriously.

"The average investor is so sensitive right now. You get a little news like that, and all of a sudden they have a shorter-term outlook on the market," said Thomas F. Lydon Jr., president of Global Trends Investments in Newport Beach, Calif.

The Leading Economic Indicators reminded investors that the economic recovery remains slow and tentative. The Conference Board said the index, an important barometer of U.S. economic activity, fell 0.4 percent in April, after inching up 0.1 percent in March.

The market's losses were widespread as investors had profits to collect in most of Wall Street's sectors.

Microsoft fell $2.02 to $54.01, Broadcom dropped $1.03 to $26.27 and Dell Computer stumbled 72 cents to $27.23.

Novellus Systems and Applied Materials fell after Fahnestock & Co. cut its rating on the chip equipment makers to "hold" from "buy." Novellus declined 82 cents to $50.50, while Applied Materials fell 53 cents to $26.78.

Among blue chips, Citigroup fell 93 cents to $45.85, 3M stumbled $1.83 to $128.24 and Coca-Cola declined 80 cents to $56.20.

Gainers included retailer Lowe's, climbing $2.04 to $46.80 on first-quarter earnings that surpassed analysts' expectations by 8 cents a share.

Market watchers weren't disturbed by today's decline, feeling that the market had hit its lows in the two months of strong selling that preceded last week's sharp advance. Barker, for example, said he believes the Dow will hold the 10,000 level and that the Nasdaq likely will hover around 1,700.

And, Lydon said, "When you have a week like (last week), it is expected that you are going to get some pull back."