Stocks tumbled Friday to close lower for the second consecutive week as investors reacted to mixed economic data and a slump in global markets spurred by jitters over Iraq and North Korea.

The Dow Jones industrial average closed lower 104.69 points, or 1.24 percent, at 8433.71. The Nasdaq Composite index ended down 37.13 points, or 2.73 percent, at 1362.42, while the broader Standard & Poor's 500 index was down 12.10 points, or 1.34 percent, at 889.48.

"The market is starting to feel that we are getting closer to war," said Arnie Owen, managing director of equities at Roth Capital Partners. "And it's a wait-and-see attitude with how fourth-quarter earnings are going to come in."

Stocks briefly cut losses after data showed U.S. consumer sentiment rose for a second month in early December. But an earlier report from the government showed that inflation at the wholesale level was more subdued than expected and raised nagging concerns of deflation in the coming year.

But the world's list of worries, including fears of a U.S. strike against Iraq, is growing longer with North Korea's decision to reactivate a nuclear power plant, worries about Iran's nuclear capabilities and a report that extremists linked to Al Qaeda received a chemical weapon in Iraq. Gold prices rose, oil prices climbed and the dollar drooped.

Major market gauges fell for the second week following their rally off Oct. 9 lows. For the week, the Dow average was down 2.4 percent, the S&P 500 fell 2.5 percent and the Nasdaq composite sagged 4.2 percent.

However, while the news appeared glum on Friday, hopes abounded that contributions by corporations to pension plans, yearly bonuses and some year-end buying will help underpin stocks over the next few weeks, traders said.

"We've gotten some bad numbers like the negative research downgrades of chipmakers, but there's an overall sense of optimism," said Patrick Duffy, a senior trader for Friedman, Billings, Ramsey.

Shares of three top semiconductor makers dropped after J.P. Morgan gave them tepid ratings due to concerns about slowing growth of personal computer sales and overcapacity.

Analyst Christopher Danely started coverage of Intel Corp. (INTC ) and Advanced Micro Devices Inc. (AMD) with "underweight" ratings. And he started Texas Instruments Inc. (TXN), which makes chips for mobile phones, at "neutral."

Intel fell 59 cents to $17.60 and ranked as the second-most active Nasdaq stock. AMD was down 43 cents at $7.32 and Texas Instruments Inc. slid 74 cents to $16.70.

The Philadelphia Stock Exchange's semiconductor index slumped 3.7 percent. The index had a bullish run in October and November, climbing about 70 percent. But it has been hit by a number of investment bank downgrades on chip stocks, and some cautious forecasts from companies like Nokia, the world's largest maker of mobile phones.

Gold stocks rose with gold prices hovering near three-year highs as investors sought safe havens in the uncertain climate. Oil and natural gas drillers like Rowan Co. Inc. (RDC) gained as oil prices stretched higher.Rowan climbed 17 cents to $23.26.

Oil prices rose as the ongoing Venezuelan general strike which has severely hampered oil exports and OPEC attempts to reduce overproduction continued to fuel bullish sentiment across the energy markets.

Video game publishers' shares fell after Goldman Sachs downgraded the sector, citing fears that a slowdown in industry growth has come sooner than expected. Electronic Arts Inc. (ERTS) fell $4.65, or 7.6 percent, to $56.70, while Activision Inc. (ATVI) dropped $1.37, or 8.2 percent, to $15.45.

Wall Street's losses were widespread, indicating that investors were more concerned that the market had rebounded too high, too fast, rather than fundamentals like profitability. General Motors (GM) fell 92 cents to $36.52, Wal-Mart (WMT ) declined 84 cents to $50.54, and Citigroup (C ) stumbled 62 cents to $36.

Bristol-Myers Squibb (BMY) topped the NYSE's most-active list, down 29 cents at $25.06, the day after a story in The Wall Street Journal put the spotlight on some of the drug maker's accounting practices.

Coca-Cola Co. (KO ) slipped 2 cents to $45.85 after reaffirming its 2002 profit expectations. However, the company also announced it will no longer release quarterly and annual outlooks because such forecasts overshadow its initiatives aimed at improving its business for the long run.

Declining issues outnumbered advancers about slightly more than 2 to 1 on the New York Stock Exchange. Trading volume was light as it had been all week. Volume came to 1.23 billion shares, compared with 1.26 billion on Thursday.

The Russell 2000 index, which tracks smaller company stocks, fell 7.37, or 1.9 percent, to 387.99.

Overseas, Japan's Nikkei stock average finished Friday down 2.2 percent. In Europe, France's CAC-40 fell 1.9 percent, Britain's FTSE 100 lost 1.5 percent, and Germany's DAX index declined 1.1 percent.

Reuters and The Associated Press contributed to this report.