Stocks lost ground for the fourth straight session. Analysts said investors had few reasons to sustain a rally, even with many stocks at enticingly low prices after recent routs. The Nasdaq composite index was the biggest decliner among the major indexes as investors sold technology stocks.

News stories kept the subprime contagion in focus. Late Friday, E-Trade Financial Corp. said the value of its mortgage-backed securities has fallen significantly and that it will need to take bigger-than-expected write-downs in the fourth quarter.

Meanwhile, troubled home lender Countrywide Financial Corp. said in a U.S. regulatory filing it could be "severely" limited if its credit rating drops into junk status. And Britain's HSBC Holdings PLC was seen as the next major financial institution to write down losses from exposure to the debt markets, according to a report from The Times of London. The bank will announce a $1 billion charge to its portfolio of high-risk subprime mortgages when it reports third-quarter results from its U.S. division, according to the report.

Blue chips held on to some of their gains, but selling was especially strong in tech stocks as more investors succumbed to the view that the sector is not strong enough to provide the economy with a cushion against the weakness in housing. Apple Inc. fell more than 7 percent after analysts described the weekend European launch of the iPod as disappointing.

According to preliminary calculations, the Dow fell 55.19, or 0.42 percent, to 12,987.55, after falling 4.06 percent last week.

The Standard & Poor's 500 index fell 14.52, or 1 percent, to 1,439.18, while the Nasdaq composite index dropped 43.81, or 1.67 percent, to 2,584.13.

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