US blue-chip stocks have fallen but bonds have risen after oil prices hit fresh two-year highs on the growing threat of war and worries about the economic and corporate outlook.
The dollar fell as it became increasingly clear the United States had failed to rally support for a more forceful disarmament of Iraq.
War jitters have spurred a sharp sell-off in recent weeks that has erased the market's early 2003 rally, and pushed the Dow down to lows last seen in mid-October.
Weak forecasts from companies such as Agilent Technologies and a surprisingly soft report on worker productivity also helped dampen the mood.
The blue-chip Dow Jones industrial average fell 55.88 points, or 0.7 per cent, to 7,929.30, and the broad Standard & Poor's 500 Index slipped 5.44 points, or 0.64 per cent, to 838.15.
The Nasdaq Composite Index was nearly unchanged, up 0.23 points, or 0.02 per cent, at 1,301.73. The tech-laden index has fallen almost 11 per cent from its 2003 peak on January 14.
Wall Street is preparing for today's US employment report, searching for more clues as to whether US economic growth is regaining momentum.
Concerns are growing that an increasing number of companies delaying investment decisions amid the uncertainty of war could stifle a rebound in the economy and corporate profits.