Stocks slipped Monday, taking a breather from a recent rally from multiyear lows, after a bankruptcy filing by US Airways Group (U) took a bite out of wilting investor confidence.

The Dow Jones industrial average lost 56.76 points, or 0.65 percent, at 8,688.69, according to the latest available figures. The broader Standard & Poor's 500 Index dropped 4.86 points, or 0.53 percent, at 903.78. The technology-laced Nasdaq Composite Index was little changed, up 0.57 points, or 0.04 percent, at 1,306.69.

Despite the Nasdaq gain, breadth was negative, with about 9 stocks falling for every 8 that rose on Nasdaq, and 17 decliners for every 15 advancers on the New York Stock Exchange.

A growing belief that the Federal Reserve will not cut interest rates at its Tuesday meeting also weighed after anticipation of a central bank move had sparked a rally last week.

"The news is not appetizing," said Larry Wachtel, stock market analyst for Prudential Securities. "You have the US Air bankruptcy and there's a universal belief the Fed won't be cutting rates (on Tuesday). The economy is also a source of concern."

US Airways sought bankruptcy protection on Sunday, the first filing by a major carrier since the Sept. 11 attacks triggered a financial crisis in the airline industry.

Regular trading in US Airways shares was halted throughout the session, after shares sank to 57 cents in pre-market trading from a close of $2.45 on Friday.

Shares of other major U.S. airlines sank. UAL Corp. (UAL), the parent of United Airlines, dropped $1.40, or almost 27 percent, to $3.80. AMR Corp. (AMR), parent of No. 1 carrier American Airlines, fell $1.23 to $8.36.

The bankruptcy announcement "...will highlight the degree of uncertainty and risk in the process of successfully restructuring an airline outside the courts," said Lehman Brothers analyst Gary Chase in a report to clients.

The S&P Airlines index lost 5 percent.

Wall Street is on edge ahead of the Fed's Open Market Committee meeting on Tuesday after hopes the Fed would cut rates to shore up the economy sent stocks soaring a week earlier.

Recent downbeat economic data have sparked fears the United States could face a dreaded "double dip," falling back into recession after a brief recovery from last year's economic contraction.

Interest-rate sensitive financials were lower amid fears the Fed will be slow to act to avoid a double-dip recession. Among the Dow issues, American Express Co. (AXP) declined 47 cents to $35.48, Citigroup (C) lost 23 cents to $34.08 and J.P. Morgan Chase & Co. Inc. (JPM) was off 89 cents to $25.46.

Former ImClone Systems Inc. (IMCL) Chief Executive Samuel Waksal pleaded not guilty to banking and securities fraud charges in an insider trading probe that threatens to catch homemaking guru Martha Stewart in its net.

ImClone shares, hammered in recent months, rose 68 cents to $8.02. The battered shares of Stewart's company, Martha Stewart Living Omnimedia Inc. (MSO), rose 4.5 percent to $6.99.

The Aug. 14 deadline set by the U.S. Securities and Exchange Commission -- the date by which the executives of about 1,000 companies must attest to the validity of their financial statements -- was also a focus of Wall Street.

There is "uncertainty about the number of corporations that will need to restate their earnings ahead of this Wednesday's deadline," Kenneth Tower, chief technical analyst at CyberTrader Inc., told clients in a note.

Investors were also spooked by disappointing earnings or outlooks from the retail sector. Federated Department Stores Inc. (FD) projected monthly same-store sales to be off by 1 percent to 3 percent and its shares fell $1.50 to $33.15.

Nasdaq decliners included Applied Materials Inc. (AMAT), down 28 cents to $13.58, after Prudential Securities cut its 12-month price target on shares of the leading semiconductor equipment maker to $21 from $27 and lowered its earnings estimates for the company, saying conditions in the industry could worsen.

Applied Materials is expected to report quarterly results on Tuesday.

Shares of gas and oil companies climbed as crude oil prices rose on fears the United States may be stepping up preparations for a possible strike against Iraq. NYMEX crude oil soared 3.7 percent to end $1 higher on Monday at $27.86 a barrel.

Noble Corp. (NE) advanced 67 cents to $32.15, while Rowan Co. Inc. gained 97 cents to $20.42.

SpeedFam-IPEC (SFAM), a supplier to the semiconductor industry, soared more than 65 percent after Novellus Systems Inc. said it will acquire all the outstanding shares of SpeedFam-IPEC.

SpeedFam IPEC shares jumped $1.87 to $4.72. Novellus shares fell 63 cents to $26.39.

Buca Inc. (BUCA) sank $1.11, or 14 percent, to $6.77 after the company, which operates Buca di Beppo and Vinny Testa's restaurants, cut its earnings forecast for the third quarter, citing a slow sales environment.

Volume was light, with 1.05 billion shares traded on Nasdaq, and 1.03 billion changing hands on the Big Board.

The Russell 2000 index fell 0.33 to 388.12.

Overseas, Japan's Nikkei stock average fell 2.5 percent. In Europe, Germany's DAX index lost 2.2 percent, Britain's FTSE 100 fell 2.3 percent, and France's CAC-40 slipped 2.4 percent.

Reuters and the Associated Press contributed to this report.