Updated from 9:08 a.m. EDT

British authorities say they have foiled a massive terror plot aimed at blowing up a series of airplanes while they were en route from the U.K. to the U.S.

A group of terrorists allegedly was targeting jets operated by

AMR's

(AMR)

American Airlines,

Continental

(CAL) - Get Report

and

UAL's

(UAUA)

United Airlines, according to numerous reports.

The reports say that 21 people have been taken into custody by U.K. police. The terrorists reportedly planned to use their carry-on luggage to smuggle explosives, in a liquid form, on board six separate planes. Hundreds of flights in to and out of London's Heathrow and Gatwick airports were being delayed or canceled. Airlines banned hand luggage on departing planes, leading to chaos and long delays.

The news sent stocks reeling domestically and abroad.

S&P 500

futures were about 5 points below fair value, and Nasdaq 100 futures were set for a decline of nearly 8 points. Overseas, the FTSE 100 dropped 1.3% at 5,784.

British Airways

(BAB) - Get Report

was the biggest FTSE 100 decliner, dropping 4.1%.

Shares of three U.S. carriers thought to be targeted were falling at least 5% in trading before the opening bell.

News of the plot prompted American authorities to tighten security measures at U.S. airports. The U.S. raised its threat level for flights from Britain to its highest level. The Department of Homeland Security said, "We cannot be sure that the threat has been entirely eliminated." Homeland Security chief Michael Chertoff described the plot as "sophisticated" and "well-advanced."

Britain's threat warning level was lifted to "critical," which means an attack is believed to be imminent. The U.S. threat level was taken to "severe," or red using the Homeland Security Department's color-coded risk-asessment scale. Additionally, the threat level was raised to "high," or orange, for all commercial flights in or destined for the U.S.

Chertoff, speaking at a press conference, said the plan was "suggestive of an al Qaeda plot," and that it was in its final stages. He also said the terrorists were "getting close to the execution phase." At U.S. airports, emergency security rules were put in place, banning liquids and gels from carry-on items.