Investors were trying to collect profits ahead of a correction — a pullback in stock prices in response to the nearly year-long market rally — but may have helped fuel the correction instead.

"This is the third day in a row of some pretty heavy-duty rotation out of the cyclical stuff into the defensive stuff, " said Scott Wren, equity strategist for A.G. Edwards & Sons. "It’s like a steamroller effect, with a little selling early on, then more and more as anticipation of a correction set in and people decided to lock in some of these profits."

According to preliminary calculations, the Dow Jones industrial average plunged 160.07, or 1.5 percent, to 10,296.89, its lowest close since Dec. 19. Since Friday, the Dow has dropped 298.66, or 2.8 percent, and swung to a loss for all of 2004 for the first time.

The broader gauges also fell considerably. On the fourth anniversary of the Nasdaq composite’s all-time high of 5,048.62, the tech-heavy index was down 31.01, or 1.6 percent, at 1,964.15. That’s a loss of 83.48, or 4.1 percent, for the week thus far, and the index’s lowest close since Dec. 22.

The Standard & Poor’s 500 index lost 16.67, or 1.5 percent, to 1,123.91, its lowest since Jan. 13.

Adding to the ambivalence, many traders were looking ahead to the government’s weekly report on unemployment claims, due Thursday, and more congressional testimony later in the day from Federal Reserve Chairman Alan Greenspan.

"The market has definitely hit a point where it’s weighing valuations against the changing tide of monetary policy," said Kevin Caron, market strategist with Ryan, Beck & Co. "We’re also looking at recent economic data that has been mixed and disappointing to some ... and that’s why the market is stalling here."

Generally good corporate earnings and economic news have convinced most economists that the recovery is on track, but equity investors have found few bargains lately on Wall Street. Lackluster gains in the labor market and uncertainty about when the Fed will move to raise interest rates have contributed to the market’s malaise.

The major indexes reached their 2004 peaks three weeks ago, and have been steadily declining since then. With no additional catalyst in sight after 12 months of solid gains, and with forecasts for first-quarter earnings still ahead, investors may be scaling back their expectations, analysts said.

"You get to a point where people feel like, ’Well, I’m paying for future earnings,"’ said Barry Berman, head trader for Robert W. Baird & Co. in Milwaukee. "And if you get the sense that you’re not going to get the future earnings, or they’re not going to come as quickly as you’d hoped, then you stop buying ... Why would you pay these prices anymore?"

With so many investors wondering what’s next for the markets, emotions are running high, magnifying disappointments and muting good news.

Procter & Gamble’s upbeat announcement kept blue chips from suffering a deeper slide, but it wasn’t enough to rally investors. P&G, the Dow’s most expensive stock, surged $3.04 to $105.53 after it raised its earnings forecast for the quarter and the year. The maker of Pampers diapers, Crest toothpaste and Mr. Clean also approved a 2-for-1 stock split and raised its annual dividend.

Meanwhile, Krispy Kreme Inc. was down $4.06, or 11 percent, at $34.10, after reporting earnings that matched expectations. Some on Wall Street expressed concern that the doughnut maker, which opened 35 new stores during the quarter, would not be able to sustain the gains.

On the Nasdaq, Sun Microsystems Inc. gained 2 cents to $4.35, rebounding from steep declines following downgrades from several brokerage firms. Analysts have questioned the long-term outlook for the computer-systems maker’s Unix business.

EchoStar Communications Corp. was down 16 cents at $34.12 after saying it was working to resolve a fee dispute with Viacom Inc. that has darkened several channels for its 9 million satellite TV customers. DISH Network owner EchoStar yanked CBS programs and Viacom’s cable channels — including MTV, VH1 and Nickelodeon — in more than a dozen cities this week. Viacom was down 98 cents at $38.24.

Decliners outnumbered advancing issues 3 to 1 on the New York Stock Exchange. Volume was light.

The Russell 2000 index, which tracks smaller company stocks, was down 10.94, or 1.9 percent, at 575.01.

Overseas, Japan’s Nikkei stock average finished 0.9 percent lower Wednesday. In Europe, France’s CAC-40 closed 0.6 percent higher, Britain’s FTSE 100 added 0.1 percent and Germany’s DAX index lost 1.1 percent.