Updated from 4:08 p.m. EDT

The major averages ended with steep losses Friday as financials and tech stocks were weaker, but it could have been worse, as a late pick-up in buying activity spared the Dow Jones Industrial Average from a loss of more than 200 points.

The Dow finished with a loss of 180.68 points, or 2%, to 8872.96. The session low was just below 8830. The Nasdaq fell 42.33 points, or 3%, to 1380.62, and the S&P 500 lost 21.84 points, or 2.3%, to 940.86. The declines came amid a monthlong rally that had taken the Dow up almost 18% and the Nasdaq higher by 16%.

For the week, the Dow gained 1.1%, the Nasdaq rose 1.4%, and the S&P climbed 1.3%.

Among Dow components, Citigroup ( C) was lower by 3.4% at $34, and J.P. Morgan ( JPM) fell 3.7% to $25.71.

The Dow's biggest percentage losers were Intel ( INTC), off 6.2% to $17.96; SBC Communications ( SBC), down 3.9% to $26.30; Hewlett-Packard ( HPQ), down 3.9% to $14.70; and Philip Morris ( MO), lower by 5.2% to $47.55.

A report in The Wall Street Journal Friday that New York's Eliot Spitzer was investigating the circumstances under which Citigroup won a lucrative investment banking deal from AT&T ( T) in April 2000 was weighing on the market.

Spitzer, the state's attorney general, reportedly wants to know what role an upgrade of AT&T by Salomon analyst Jack Grubman had in gaining the business and whether the upgrade was influenced by Citigroup Chairman Sanford Weill. Grubman resigned under pressure from Salomon last week.

The broader financial sector was weaker. The NYSE Financial Index was down 1.7%. The Philadelphia Stock Exchange/KBW Bank Index dropped 2.2%, and the American Stock Exchange Broker/Dealer Index lost 2.5%.

Also affecting trading was a report that most of the $49 million in advertising transactions being reviewed at AOL Time Warner ( AOL) involved bankrupt WorldCom.

The story highlighted uncomfortably close ties between AOL and WorldCom, including a deal under which AOL pledged to do close to $1 billion worth of Internet business with the bankrupt telecom in exchange for $200 million of advertising.

A separate story in London's Financial Times said the Securities and Exchange Commission is preparing to open an investigation into optimistic comments by AOL executives last year at a time when 15 insiders were selling stock at a profit of some $500 million. The story said there's no reason to think the executives didn't believe what they were saying. AOL gave up 9% to $12.76.

Also in investors' sights were downgrades of both Staples ( SPLS) and Countrywide Credit ( CCR) at Goldman Sachs; a positive mention for Dutch biotech Crucell ( CRXL) in BusinessWeek; and a much narrower than expected loss at TiVo ( TIVO) after the bell Thursday.

Treasuries were stronger Friday. Around 4 p.m. EDT, the 10-year note was adding 21/32 to 101 3/32, to yield 4.239%. The 30-year bond was gaining 1 4/32 to 105 10/32, yielding 5.022%.

Overseas stocks were mostly lower. London's FTSE was down 1% to 4390, and Germany's Xetra DAX lost 2% to 3828. In Asia, Japan's Nikkei rose 0.5% to 9867, while Hong Kong's Hang Seng lost 1.7% to 10,246.