The downward trend underscored that the equity market is deeply mired in the trading doldrums characteristic of late summer, though analysts noted there are additional pressures this year such as the fears that the Olympics in Athens or the upcoming Republican convention in New York might be targets of terrorism, said Janna Sampson, of Oakbrook Investments.

"People are thinking there is just no good reason to take on this risk," Sampson said. "I know I've got clients who are telling me they have money but they're waiting until after these things are over. And we don't often see institutional investors holding up for events."

According to preliminary results, the Dow Jones industrial average fell 42.33, or 0.4 percent, to 10,040.82. The Nasdaq composite index fell 11.48, or 0.6 percent, to 1,819.89. The Standard & Poor's 500 index was down 3.94, or 0.4 percent, at 1,091.23.

Oil prices soared $1.48 to $48.75 on the New York Mercantile Exchange, despite assurances from Iraq that it would resume full exports from its southern terminals. Further rattling traders, Iraqi cleric Muqtada al-Sadr rejected an offer to end his militia group's two-week-old standoff in the holy city of Najaf.

The number of Americans filing new claims for unemployment benefits fell for a third consecutive week, suggesting improvements in the labor market after a rough patch earlier this summer. But the figures do not include the impact of Hurricane Charley, which will be reflected in next week's data.

Separately, a measure of future economic activity fell in July for the second consecutive month, reinforcing other data that indicates the recovery is slowing. The decline in the Conference Board's Index of Leading Economic Indicators reflects growing concerns about rising costs for energy and food, as well as worries about future economic growth.

Weaker forecasts from software companies also have weighed heavily on the market.

"Some of the market's bellwethers are technology issues, and they're very sensitive to the economy," said Steven Goldman, of Weeden & Co. in Greenwich, Conn. "If there is a shadow of doubt, investors become risk-averse. And tech stocks have a very difficult time in an uncertain environment."

Google, which set its final IPO price at $85 late yesterday — far lower than previously forecast — began trading shortly before noon, and closed up $15.34 at $100.34. Other search engines, closely watched as Google comes to market, posted declines: Yahoo! Inc. was down

37 cents at $28.11 and Ask Jeeves Inc. fell 4 cents to $26.04.