Stocks sagged on Monday amid investor worries about the cost and duration of U.S. air strikes against Afghanistan and as Wall Street braced for the worst corporate earnings season in a decade.

The Dow Jones industrial average fell 51.83 points, or 0.57 percent, to 9,067.94, and the Nasdaq composite index edged up 0.65 of a point, or 0.04 percent, to end at 1,605.95.

The Standard & Poor's 500 index dropped 8.94 points, or 0.84 percent, to 1,062.44.

"We've got the start of military action, so that cast some uncertainty over the marketplace" said Michelle Clayman, chief investment officer at New Amsterdam Partners. "Any time you actually engage in warfare there's some trepidation."

Trading volume was lighter than normal, which could be attributed partly to traders' caution, as well as the Columbus Day holiday. By the end of the session, about 980 million shares changed hands on the New York Stock Exchange and 1.4 billion on the Nasdaq.

Declining issues outnumbered advancers nearly 3 to 1 on the New York Stock Exchange.

The U.S. government bond market -- a place investors often seek shelter in times of uncertainty -- was closed for the holiday.

Strength in stocks of computer chip makers and other beaten-down high-technology sectors helped put a floor under the market. Defense stocks, like missile-maker Raytheon Co. jumped as Wall Street bet that increased government spending on military gear could increase their profits. 

Raytheon, maker of the Tomahawk missiles used by both the U.S. and British military, rose $1.33 to $36.30, after hitting a 52-week high at $37.40 earlier in the session. Lockheed Martin Corp. rose $1.38 to $49.11, earlier hitting a 52-week high at $49.73. Lockheed builds the F-16 fighter jet and makes ballistic missiles that may be launched from submarines.

Earnings, however, were not far from investors' thoughts. Hotel and entertainment stocks, including amusement-park operator Walt Disney Co. fell as traders yanked cash out of companies that could be hurt by a slowdown in travel and spending on leisure activities.

Disney fell 49 cents to $18.71 and hotel chain Marriott International dropped $1.11 to $32. The S&P Entertainment index fell 4.1 percent.

"This week, we're being deer in the headlights," said Don Ross chief investment officer of investment management firm National City, which oversees $27 billion. "There's a lot of uncertainty and risk, and stock prices fall to reflect that."

This week marks the beginning of the third-quarter earnings season, when companies report financial results and hint at what is to come later in the year. The reports are expected to show the sagging economy, as well as slower consumer and capital spending, hurt profits. 

Analysts now forecast third-quarter profits will fall an average of 21.3 percent from a year ago, according to Thomson Financial/First Call. That's the worst performance since the second quarter of 1991. 

The economy is widely seen as already in recession, but the Fed's nine interest-rate cuts this year as well as President Bush's proposal for a fat stimulus package are seen boosting the economy by 2002.

Although overshadowed by the political events, merger news was also in focus. AOL Time Warner Inc. was the most active on the NYSE, falling $2.06 to $31.75 on concerns that the media conglomerate would be forced to buy back part of its stake in AOL Europe from Bertelsmann AG at well above the estimated market price.

AT&T Wireless Services Inc. , the No. 3 U.S. wireless company, agreed to acquire the 77 percent of TeleCorp PCS Inc. it does not already own for $2.4 billion in stock. AT&T Wireless fell 52 cents to $15.60, while TeleCorp rose $3.50 to $13.54.

Also, top U.S. radio broadcaster Clear Channel Communications Inc. is buying media and broadcasting company Ackerley Group Inc. for $495 million in stock. Clear Channel fell $1.01 to $39.30, while Ackerley jumped $2.40, or 22 percent, to $13.40.

The Russell 2000 index, which tracks the performance of smaller company stocks, fell 2.79 to 412.18. 

Overseas markets were narrowly mixed Monday. Germany's DAX index inched up 0.2 percent, Britain's FT-SE 100 slipped 0.1 percent, and France's CAC-40 advanced 0.2 percent. 

Japan's markets were closed for a holiday.

Reuters and the Associated Press contributed to this report.