Dow Jones average falls 355 points

NEW YORK -- Stocks tumbled Tuesday, as investors grew skittish over a series of developments ranging from lower-than-expected manufacturing activity to brokerage downgrades of Citigroup Inc. and Ford Motor Co. The Dow Jones industrials fell 355 points.

"We're back to work from a not-so-good August," said Arthur Hogan, chief market analyst at Jefferies & Co. "We came in with a couple of downgrades and just a general sense the economy hasn't picked up the way we would like to see it."

The Dow Jones industrial average closed down 355.45, or 4.1 percent, at 8,308.05. It was the largest one-day loss since July 19, when the Dow dropped 390.23, and it came after a 2.4 percent decline last week to break a five-week winning streak.

The broader market also finished sharply lower. The Nasdaq composite index declined 51.01, or 3.9 percent, to 1,263.84, after falling 4.8 percent in the previous week to end three weeks of gains.

The Standard & Poor's 500 index fell 38.05, or 4.2 percent, to 878.02, following a drop of 2.6 percent to end a five-week run higher.

The Institute for Supply Management said its index of business activity remained steady at 50.5 in August, below analysts' expectations of 51.8. An index above 50 signifies growth.

Analysts say investors were intently watching the release of several economic reports this week, including the ISM report, as they seek evidence that the recovery is continuing now that accounting scandals appear to be fading.

Next week's anniversary of the Sept. 11 attacks and concerns about a possible war with Iraq also are encouraging some nervous investors to lock in profits now, analysts say.

"It's a series of smaller things looming up in the face of 9-11 and the fact that September is historically the worst month of the market. It's getting us off to a lousy beginning," said Tony Cecin, director of institutional trading at US Bancorp Piper Jaffray in Minneapolis.

Last week, the three major indexes fell in thin trading before the Labor Day weekend on a spate of mixed economic reports as well as profit-taking following five straight weeks of gains on Wall Street.

Losers on Tuesday included companies with reduced outlooks or downgraded shares. Intel dropped 81 cents to $15.86 after Lehman Brothers reduced the computer company's third-quarter revenue forecast, citing poor demand. Ford dropped 83 cents to $10.94, and Citigroup declined $3.36 to $29.39, both on ratings downgrades.

IBM fell $3.03 to $72.35, on news that it may have to cut 4,000 jobs once it completes its acquisition of PricewaterhouseCoopers' consulting arm, according to The Wall Street Journal.

On the plus side, UAL rose 7 cents to $2.94 after the company named an aviation newcomer to become the new chief executive of its United Airlines unit, replacing interim CEO Jack Creighton.

Declining issues outnumbered advancers more than 4 to 1 on the New York Stock Exchange. Volume remained light at 1.28 billion, compared to 908.46 million on Friday.