Analysts weren't too concerned, suggesting that many investors were simply locking in profits from Friday's big advance. Even with today's decline, the market held most of its gains.

The Dow Jones industrial average closed down 104.60, or 1.1 percent, at 9,274.90. The average rose 324 points Friday.

Broader stock measures also retreated. The most significant losses came in the technology-focused Nasdaq composite index, which fell 42.75, or 3.0 percent, to 1,405.61. The Standard & Poor's 500 index was down 12.05, or 1.2 percent, at 976.98.

The Nasdaq gained 68.19 on Friday, while the S&P advanced 35.04.

"We got just a little bit ahead of ourselves on Friday, so to get a little bit of pullback today is normal," said Ralph Acampora, director of technical research, Prudential Securities. We're trying to digest those gains, stabilize and then mount a rally."

Still, some of the selling reflected the same problems that have dogged the market for weeks. A Wall Street Journal story questioning Merck's accounting practices sent the pharmaceutical company's stock down as investors yet again wondered about the truthfulness of corporate earnings reports.

Merck, which denied any wrongdoing, fell $1.05 to $47.81. Meanwhile, Merrill Lynch downgraded the stock, citing the possibility of a delay in the planned spinoff of its Merck Medco unit.

Accounting issues also hurt WorldCom, which fell 2 cents to 23 cents as Congress began hearings into whether the telecommunications company defrauded investors through its bookkeeping. WorldCom and Merck are two of the many companies that have come under scrutiny this year because of questions about their financial reports.

Disappointing quarterly results sent Alcoa down 88 cents to $32.50 after the aluminum company failed to meet analysts' forecasts, despite its first sequential revenue increase in more than a year.

Investors also sold the technology sector lower. Texas Instruments lost 83 cents to $24.15, while Dell slid $1.24 to $24.75. Bellwether IBM dropped $2.20 to $71.30.

Retailers were mixed. Wal-Mart fell 40 cents to $55.60. Sears, Roebuck advanced 44 cents to $52.57.

The market has been falling since mid-May on doubts that earnings will be strong enough to justify stock prices. The recent string of corporate bookkeeping scandals has compounded the selling as investors decide they're better of taking any profits now ­ rather than risk losing them later on more bad news.

Second-quarter earnings reports are expected later this month, but until then stocks will have few catalysts outside of corporate news stories like Merck's. That might not be a bad thing, however. Many analysts believe the market could use a rest. Last week, the Nasdaq recorded its lowest close in five years.

"What we need is not so much good news, as a week without more bad news," said Michael Murphy, head trader at Wachovia Securities. "Buyers have been paralyzed, and we're going to have see their confidence in the market restored to move up."

Advancing issues led declining issues 8 to 7 on the New York Stock Exchange, but the reverse was true on the Nasdaq Stock Market, where decliners led advancers 2 to 1. NYSE volume was light at 1.16 billion shares, compared with 708.72 million shares Friday. Trading ended Friday at 1 p.m. EDT because of the July 4 holiday weekend.

The Russell 2000 index fell 7.31 to 433.61.

Overseas, Japan's Nikkei stock average dropped 0.5 percent. In Europe, Germany's DAX index fell 0.9 percent, Britain's FTSE 100 slipped 0.3 percent, and France's CAC-40 lost 0.1 percent.