Analysts said investors remained worried about a war with Iraq as well as the strength of the economic recovery. A government report showing strong retail sales helped lessen the anxiety, but was not enough to outweigh the day's other bad news.

"It's a combination of poor earnings, some uncertainty about (terrorism) and a little more evidence that consumers don't seem to be as confident," said Robert Harrington, co-head of listed block trading at UBS Warburg. "That could mean more softness in the economy."

The Dow Jones industrial average fell 66.72, or 0.8 percent, to close at 8,312.69, according to preliminary calculations. That came after a 2.4 percent decline on Thursday and a 0.3 percent dip on Wednesday, the anniversary of Sept. 11.

But the broader market finished higher. The Nasdaq composite index gained 11.68, or 0.9 percent, to 1,291.36, having fallen 2.7 percent in the previous session. The Standard & Poor's 500 index rose 2.89, or 0.3 percent, to 889.80, following a drop of 2.5 percent.

The three major market gauges finished the week lower for a third straight week, an unenviable distinction not seen since the weeks ending June 7 to June 21. For the week, the Dow lost 1.4 percent, the Nasdaq declined 0.3 percent, and the S&P fell 0.5 percent.

Analysts said terrorism remained a concern for investors. In south Florida, three people in two cars were detained and a cross-state highway was shut down after a woman reported hearing the men talking about going to Miami and "bringing it down." Authorities later blasted open what appeared to be a backpack from one of the vehicles.

Meanwhile, the University of Michigan on Friday said consumer sentiment in September fell to 86.2 from the previous month's figure of 87.6, according to Dow Jones Newswires. Analysts were expecting a higher reading of 87.0.

But the Commerce Department reported retail sales rose 0.8 percent in August, driven largely by a big jump in auto sales. The solid showing caught analysts by surprise.

The Labor Department also said its producer price index, which measures inflation pressures before they reach the consumer, was unchanged in August, compared to a 0.2 percent drop in July. The lack of inflation pressures has been a main reason the Federal Reserve has been able to leave interest rates at a 40-year low.

"The overall economy is just not hitting the numbers," said Charles Pradilla, chief investment strategist at SG Cowen Securities. After weeks of declines, "the market has a higher risk premium, so it just can't tolerate the bad news," he said.

Earnings warnings also dragged down stocks.

Honeywell fell $4.78, or 17 percent, to $23.56 after the diversified manufacturer lowered its third-quarter outlook. The announcement pressured other manufacturing companies, including United Technologies, which declined $3.10 to $58, and General Electric, which fell 95 cents to $27.05.

Lucent dropped 39 cents to $1.26 after the telecommunications company said it expects weak fourth-quarter revenue because of soft consumer spending.

But tech issues got a boost from Adobe Systems, which rose $2.32 to $20.77, after meeting lowered third-quarter earnings expectations and reporting that its finances should remain stable in the months ahead.

Advancing issues outnumbered decliners 7 to 6 on the New York Stock Exchange. Volume was light.

The Russell 2000 index, the barometer of smaller company stocks, rose 3.72, or 1 percent, to 389.99.