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Updated from 4:06 p.m.

Blue-chips finished lower on light volume Monday as a major airline's bankruptcy and growing skepticism of about whether the

Federal Reserve

will cut interest rates kept buyers at bay.

The

Dow Jones Industrial Average

closed down 57 points, or 0.7%, to 8688. The

Nasdaq

added a fraction to 1307, while the

S&P 500

shed 5 points, or 0.5%, to 904. Volume was 1 billion shares on the

NYSE

and 1.1 billion on the Nasdaq.

Wall Street is facing a potentially volatile week that also includes a deadline for CEOs to sign their companies' financial statements and a key reading on retail sales.

Stocks rose last week on growing optimism that the Fed would cut interest rates when it meets Tuesday, with the Dow adding more than 5% over the five sessions.

But the rate-cut optimism ebbed at week's end when Fed officials showed up as anonymous newspaper sources saying that a flat-out easing was unlikely, although the statement accompanying the decision could be weighted toward economic weakness.

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Adding to the coming week's potential volatility is a key report on retail sales scheduled for Tuesday and Wednesday's deadline for most companies to file signed financial statements with the

Securities and Exchange Commission

.

Analysts were also ambivalent about the impact of the SEC deadline, noting that the shares of companies that have already filed have actually underperformed the market in recent weeks.

The latest big company to take the pledge is

Disney

(DIS) - Get Walt Disney Company Report

, whose CEO, Michael Eisner, swore out papers on Friday. Disney also disclosed Friday that it has employed the adult children of three of its supposedly independent directors over the last year, a development that could force it to reorganize its board in light of the New York Stock Exchange's new rules on director independence.

US Airways

(U) - Get Unity Software, Inc. Report

, the nation's seventh-largest airline, filed for Chapter 11 bankruptcy protection on Sunday, saying it hopes to cut costs and re-emerge with a $200 million investment from Texas Pacific Group in the first quarter of 2003. Shares plummeted 80% to 51 cents in premarket trading on Instinet but were halted before the regular session opened on the Big Board. The Dow Jones Transportation Index was down 1.8%.

On the research front, Lehman Brothers raised its investment rating on three analog semiconductor companies to overweight from underweight.

The brokerage firm upgraded

Analog Devices

(ADL)

,

Linear Technology

(LLTC)

and

Maxim Integrated Products

(MXIM) - Get Maxim Integrated Products, Inc. Report

on the basis of valuation and more realistic market expectations.

Elsewhere, Salomon Smith Barney cut its third-quarter earnings estimate on

Intel

(INTC) - Get Intel Corporation Report

, citing weaker-than-expected PC component sales. The stock slipped 2.2% at $17.50. The Philadelphia Semiconductor Index was down 1.2%.

U.S. Treasury issues were higher. The 10-year note was up 12/32 to 101 11/32, yielding 4.21%. The long bond was gaining 20/32 to 104 19/32 and yielding 5.07%.

Overseas markets were lower. London's FTSE 100 lost 2.3% to 4221, and Germany's Xetra DAX was down 3% to 3647. Japan's Nikkei 225 fell by 2.5% at 9748. Hong Kong's Hang Seng closed down 0.5% to 9960.