The Dow Jones industrial average and the Standard & Poor's 500 posted their steepest weekly drops since September as a fall in consumer sentiment and rumors of new accounting irregularities persuaded investors to pull out of the market despite upbeat news from Dell Computer (DELL) and General Electric (GE).

The Dow dropped 117.00 points, or 1.33 percent, to 8,684.53, while the benchmark S&P gave up 5.97 points, or 0.64 percent, to 921.40. Damage was limited at the tech-heavy Nasdaq composite, which slipped 0.87 of a point to 1,373.56.

For the week, the Dow fell over 700 points, or 7.4 percent, the largest percentage drop since after the Sept. 11 attacks. The S&P 500 fell 11.6 percent.

"What the market is saying is: Be very defensive," said Gary Kaltbaum, market technician for Investors' Edge Partners in Orlando, Fla.

The Russell 2000 index, which tracks smaller company stocks, fell 4.32, or 1.0 percent, to 412.36.

Doubts over corporate credibility, fears of another terror attack and apprehension over the second-quarter earnings season are roiling Wall Street.

Jitters over corporate chicancery resurfaced after Duke Energy said it received subpoenas from federal agencies requesting documents relating to its trading activities, including "round-trip trades," deals between two counterparties of the same volumes at the same price.

The market endured a seesaw session. Stocks rose at the open after a rosy outlook from Dell Computer and a 14 percent increase in earnings from General Electric. But the rally faded as a surprise tumble in consumer sentiment fed worries that consumer spending, which supports about two-thirds of the economy, may wane in coming months.

"If the consumer slows, then the economy may be a little worse than expected and that will cause some nervousness," said Barry Hyman, chief investment strategist at Ehrenkrantz King Nussbaum.

Stocks pared gains early in the day after a report showed that U.S. consumer sentiment sank in early July as the stock market drubbing soured Americans' expectations. The University of Michigan's preliminary consumer sentiment index fell to its lowest level since November 2001 in July, down to 86.5 from 92.4 in June.

Rumors swirling around consumer products giant Procter & Gamble Co. (PG) added more pressure to the market late in the day. P&G's chief financial officer said late Friday that speculation in the stock market about possible accounting irregularities at the consumer products giant had no basis. The Dow component ended down $2.32 to $83.63.

Home Depot (HD) dragged on the Dow with a $2.31 drop to $29.09. The home improvement retailer sank to $28.40 earlier in the day, hitting its lowest level since October 1998. Merrill Lynch downgraded the retailer, citing tough competition from the company's main rival, Lowe's Cos., and sluggish sales.

Duke Energy Corp. (DUK) kept worries over corporate credibility alive. The utility, which plunged $3.20 to $24.75, said it received subpoenas from federal agencies requesting documents relating to its trading activities.

But the session had a few bright spots. Dell rose $1.10 to $25.03. The No. 2 personal computer maker raised its second-quarter earnings and revenue guidance, citing market share gains. Several analysts raised their estimates for Dell's results for the rest of the year.

General Electric rose $1.25 to $28.60. The Dow member said second-quarter earnings rose 14 percent, powered by gas turbine sales. GE executives backed the conglomerate's full-year earnings forecast, which analysts saw as a modestly positive sign for the broader economy.

Juniper Networks (JNPR) headed up 48 cents to $7.70 after the telecommunications equipment maker's second-quarter revenues were stronger than Wall Street expected. Rival Cisco Systems Inc. rose 33 cents to $14.38.

The University of Michigan report showing a drop in consumer sentiment contrasted with firm retail sales numbers issued before the market's open. The Commerce Department said retail sales bounced back in June, rising 1.1 percent overall and, excluding cars, by 0.4 percent.

Declining stocks beat out advancers by a ratio of 19 to 13 on the New York Stock Exchange and 9 to 8 on the Nasdaq. More than 1.59 billion shares changed hands on the Big Board and 2 billion on Nasdaq in moderate trading.

Overseas, Japan's Nikkei stock average finished Friday up 1.1 percent. In Europe, France's CAC-40 inched up 0.04 percent, Britain's FTSE 100 slipped 0.1 percent, and Germany's DAX index rose 0.3 percent.

Reuters and the Associated Press contributed to this report.