NEW YORK — Investors already edgy about the economy got new reasons to sell stocks yesterday with the release of four disappointing economic reports. Continuing worries about a potential war with Iraq and what it might do to the economy depressed the market further.

Analysts said investors were particularly unnerved by a jump in energy prices, fearing costs will go up even more if there is a war with Iraq.

"People are unwilling to invest and make commitments until we get clarity on Iraq," said Brian Bush, director of equity research at Stephens Inc.

The Dow Jones industrial average closed down 85.64, or 1.1 percent, at 7,914.96. Microsoft, a Dow component, fell 38 cents to $24.15. Boeing, also a Dow member, dropped $1.01 to $29.17.

The broader market also pulled back. The Nasdaq composite index declined 3.09, or 0.2 percent, to 1,331.23. The Standard & Poor's 500 index fell 8.03, or 1 percent, to 837.10.

A string of downbeat economic reports pulled the market lower. First, there was news that the United States recorded a $435.2 billion trade deficit for 2002, the largest imbalance in history, as the weak global economy hampered U.S. exports while imports of autos and other consumer goods reached record highs.

And the Labor Department reported that inflation at the producer, or wholesale, level jumped 1.6 percent last month, the biggest increase in 13 years, led by a 4.8 percent spike in energy costs.

The government also said the number of newly laid-off workers filing unemployment claims jumped to a seven-week high of 402,000 last week, up 21,000 from the previous week.

In the fourth report, the Conference Board said a key gauge of future economic activity declined last month, breaking from three straight months of gains. The industry group reported that its Index of Leading Economic Indicators slipped by 0.1 percent in January from a month ago to a revised 111.2, weaker than the flat reading analysts had expected.

"Iraq is essentially a wet blanket over the economy at this point," said Kevin Caron, market strategist at Ryan, Beck & Co. "When you get a slightly higher-than-expected jobless-claims number and a rise in producer prices because of oil, there is some concern about the economy."

Investors have been fretting that a war with Iraq would prompt consumers and businesses to further clamp down on spending, derailing an already slow economic recovery.

Target fell $1.10 to $26.77 after meeting fourth-quarter earnings expectations but reporting smaller-than-anticipated revenue. The retailer also said same-store sales, those at stores open at least one year, fell 2.2 percent in the last three months of 2002.

Skechers U.S.A. dropped $1.91 to $6.09 after the maker of trendy footwear reported a fourth-quarter loss of 23 cents a share, more than the 21 cents analysts anticipated.

Gainers included J.C. Penney, which rose $1.34 to $19.77 after releasing fourth-quarter earnings that surpassed Wall Street's forecast.

Trading was extremely light as many investors chose to stay on the sidelines.

"No one is going to make a bet in this market until we think we are close to a resolution in Iraq. That is what you are seeing in the weak volume," said Stephens' Bush.

Gold / oil

In U.S. trading yesterday, gold rose $3.10 to $353.10 per ounce, while oil dropped 30 cents to $36.54 per barrel.