updated 8/31/2004 7:59:32 AM ET 2004-08-31T11:59:32

An unsettling report on consumer incomes set off a spate of profit-taking on Wall Street Monday, as investors worried that a tepid economy would erode companies’ third-quarter earnings.

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Another drop in oil prices failed to shake the gloom from the market.

While investors were cheered by the Commerce Department’s report of a strong rise in consumer spending for July, nearly flat growth in personal incomes and a handful of profit warnings for the third quarter made investors nervous. The news prompted them to cash in their gains following two weeks of advances.

“There’s not a lot of resistance here, and you’re seeing a little bit of profit taking,” said Todd Leone, managing director of equity trading at SG Cowen Securities. “Trading lower is the path of least resistance.”

Trading volume was again extremely light as many on Wall Street refused to make large moves until the Republican National Convention concluded without incident. Many investors also awaited the government’s August employment report due Friday, hoping for signs that the economy was emerging from a sluggish summer.

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At the close, the Dow Jones industrial average was down 72.49 points, or 0.7 percent, at 10,122.52, while the broader Standard & Poor’s 500-stock index was down 8.62 points, or 0.8 percent, at 1,099.15. The tech-loaded Nasdaq composite index dropped 25.60 points, or 1.4 percent, to 1,836.49.

The Commerce Department said consumer spending rose 0.8 edging activities. Earnings before one-time charges will be between $1.26 and $1.33 per share — analysts had forecast $1.45 per share.

Accredo Health Inc., a specialty pharmacy management company, met its fourth-quarter earnings targets, but said its 2005 growth would be less than Wall Street expected. Accredo was down $5.75 at $22.05.

Oracle Corp. slipped 18 cents to $10.11 after Wells Fargo cut its 2005 earnings forecasts for the business software maker. The brokerage nonetheless reiterated a “buy” on Oracle.

Declining issues outnumbered advancers by more than 8 to 5 on the New York Stock Exchange, where volume came to 846.93 million shares, compared to 843.72 million on Friday.

Overseas, Japan’s Nikkei stock average fell 0.2 percent. In Europe, Germany’s DAX index and France’s CAC-40 both slipped 0.3 percent for the session. Britain’s exchanges were closed for a holiday.

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