Stocks fell to their lowest levels in nearly four months Friday as relentless worries over war, heightened security concerns and corporate profits overshadowed a report showing the economy created new jobs at its fastest rate in more than two years in January.

The blue-chip Dow Jones industrial average fell 65.07 points, or 0.82 percent, to 7,864.23, while the broad Standard & Poor's 500 Index lost 8.46 points, or 1.01 percent, to 829.69. Both indexes closed at their lowest levels since Oct. 10. The technology-loaded Nasdaq Composite Index fell 19.27 points, or 1.48 percent, to 1,282.46, its worst finish since Oct. 17.

All three key market gauges racked up their fourth straight week of declines, with the Dow down 2.4 percent and the S&P 500 and the Nasdaq both down about 3 percent for the week, pushing them ever closer to multiyear lows hit in early October.

"It's very difficult to look at just fundamentals right now. There's really no way to interpret this market ex-Iraq," said Brian Pears, head of equity trading at Victory Capital Management. "Until Iraq is out of the way, all people see is the fog that we're shrouded in."

President Bush's warning that "the game is over" for Iraqi President Saddam Hussein and his statement that the United Nations must make up its mind soon on whether to back its demands that Iraq disarm kept investors on edge.

U.S. officials' decision Friday to raise the nation's threat assessment to the second-highest level due to a higher risk of terror attacks contributed to the market's jitters.

"Stocks have failed to build on this morning's decent jobs data with prices dropping soon after the open amid renewed terrorist threats," said John Simon, stock index futures analyst at TradeSignals.com, a commodity trading adviser.

The unemployment rate in January tumbled to a 4-month low of 5.7 percent from 6 percent, the government said before the bell, and the number of workers on U.S. payrolls outside the farm sector rose 143,000. The fall in the jobless rate defied expectations it would stay unchanged from December, and the rise in jobs was more than double the 70,000 economists had forecast.

"It's a good number. There might be seasonal factors, but it suggests the job market might be improving, and that's important," said Peter Cardillo, chief strategist at Global Partners Securities, "What will this do to the market? It will give it an initial boost."

Companies ranging from computer maker Dell Computer Corp. to party goods chain Party City Corp. are cautioning that 2003 will be another difficult year against the murky geopolitical backdrop.

The government said shortly before the open that the unemployment rate slipped to a four-month low of 5.7 percent from 6 percent in December. The number of workers on U.S. nonfarm payrolls rose 143,000, more than double the 70,000 economists had forecast.

Economists welcomed the data as an indication the economy could be shaking off its persistent weakness. But some played down the report, saying it might have been skewed by seasonal fluctuations related to the volatile retail job market.

Dell Computer Corp. (DELL) joined a flood of companies giving cautious corporate outlooks. The No. 2 personal computer maker fell 68 cents, or nearly 3 percent, to $23.34 after saying Thursday that corporate spending on technology will be soft this year due to the weak economy and concerns about a potential U.S. war with Iraq.

Party City (PCTY), the largest U.S. party goods chain, tumbled $2.96, or 26 percent, to $8.61. The company reported a slight increase in fiscal second-quarter income but warned that full-year results would fall short of Wall Street estimates.

Pixar Animation Studios Inc. (PIXR) sank $2.71, or 5 percent, to $51.70. The company posted fourth-quarter earnings that topped Wall Street estimates but said it might not renew its existing movie distribution deal with Walt Disney Co. and had begun to talk with other studios.

Cigna Corp. (CI), one of the biggest U.S. health insurers, provided one bright spot, surging 10 percent after it said its quarterly net income sank 75 percent under the weight of charges, but still managed to beat Wall Street expectations for the quarter. It climbed $3.80 to $43.02.

Corning Inc. (GLW), the world's No. 1 maker of fiber-optic cable, on Friday forecast a return to profitability in the third quarter and said its first-quarter loss would be narrower than expected. It jumped 37 cents, or 9 percent, to $4.57.

Scios Inc. (SCIO) spiked $7.51, or 22 percent, to $42.20 and was among the most active stocks on the New York Stock Exchange after the Wall Street Journal reported on Friday that drugmaker Johnson & Johnson (JNJ) is in advanced talks to buy the biotechnology company. J&J dipped 28 cents to $51.84.

Tech Data Corp. (TECD) sank $4.74, or 20 percent, to $19.50. The company said it had offered to buy technology distributor Azlan Group PLC for $235 million and warned that its fiscal 2004 profit would dip due to "uncertain demand." Tech Data is the second-biggest distributor of computer products behind Ingram Micro Inc., which was down $1.86, or 16 percent, to $9.52.

Declining stocks outpaced advancers by a ratio of about 2 to 1 on the New York Stock Exchange and nearly 2 to 1 on Nasdaq. More than 1.2 billion shares changed hands on the Big Board and more than 1.2 billion on Nasdaq in moderate trading.

The Russell 2000 index, which tracks smaller company stocks, dropped 5.96, or 1.6 percent, to 358.78.

Overseas, Japan's Nikkei stock average finished 0.4 percent lower Friday. In Europe, France's CAC-40 dropped 1.4 percent, Britain's FTSE 100 inched up 0.1 percent and Germany's DAX index declined 3 percent.

Reuters and the Associated Press contributed to this report.