A bearish earnings announcement from J.P. Morgan Chase helped push the Dow down as much as 156 points before the blue chips recovered some ground on afternoon bargain hunting.

"The financial sector is getting blasted again based on the J.P. Morgan pre-release. That's having a rollover effect," said Tony Cecin, director of institutional trading at US Bancorp Piper Jaffray in Minneapolis. "You also have a continuing push on Iraq."

"But today, I think it's more related to the perception that third-quarter earnings are not going to be what people are hoping for," he said.

The Dow Jones industrial average fell 35.03, or 0.4 percent, to close at 8,172.52, according to preliminary calculations. The finish, which came after a 173-point drop yesterday, was the lowest since Aug. 5, when blue chips closed at 8,043.63.

The broader market also finished lower. The Nasdaq composite index fell 7.82, or 0.6 percent, to 1,252.12. The Standard & Poor's 500 index dropped 4.04, or 0.5 percent, to 869.48.

Analysts say investors have become increasingly jittery in the past month amid concerns about the strength of the economic recovery, a war with Iraq, and the fact that September is historically the worst month on Wall Street.

Since Aug. 22, the Dow has dropped nearly 900 points, due in part to a stream of mixed economic reports that failed to reassure investors of a comeback.

"The economic data has not been suggestive of either an improving or a deteriorating economy, but a flatlining economy," said Joseph V. Battipaglia, chief investment officer at Ryan Beck & Co. "So it's hard for investors to get fully engaged in buying stocks at this point."

Disappointing earnings announcements, which began in full force this week, also pressured the market.

J.P. Morgan Chase fell $1.11 to $20.44 after the bank said third-quarter profits would fall well below second-quarter earnings. The news dragged down the banking sector, including Citibank, which declined 69 cents to $29.11.

Tech stocks fell in concert with Oracle, which dropped 71 cents to $8.32 after the software maker predicted lower revenue in the current quarter due to weak sales.

Meanwhile, mixed economic reports added to the market's caution.

The Labor Department reported Wednesday that consumer inflation rose 0.3 percent in August, the biggest gain in four months. 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.

But the Commerce Department reported that the U.S. trade deficit fell to $34.6 billion in July as exports rose for a fifth straight month.

Hershey fell $8.81 to $65 after the charitable trust that controls the candymaker said it would not sell the company.

Gainers included Nike, which rose $1.35 to $43.05, after the athletic shoemaker reported first-quarter earnings that beat analysts' expectations.

Declining issues outnumbered advancers about 4 to 3 on the New York Stock Exchange. Volume was moderate.

The Russell 2000 index, which tracks smaller company stocks, fell 2.56, or 0.7 percent, to 376.75.