Analysts said that although investors are still wary that stocks will fall back again, they were reassured by news that President Bush had signed into law legislation that toughens penalties for corporate fraud.

"This pullback that we're getting is great. This is not panic, just a healthy rest," said Ralph Acampora, director of technical research at Prudential Securities. "At least on a short-term basis we're starting to feel better."

The Dow Jones industrial average closed down 31.85, or 0.4 percent, at 8,680.03, according to preliminary calculations, after alternating between gains and losses for much of the day. In the last five sessions, the Dow has regained 977.69 of the 2,650.74 points lost in more than two months of selling.

Broader stock indicators closed modestly higher. The high-tech focused Nasdaq composite index advanced 8.93, or 0.2 percent, to 1,344.18, while the Standard & Poor's 500 index rose 3.82, or 0.7 percent, at 902.78.

Stocks fluctuated throughout the session as investors alternated between optimism and pessimism about the prospects for more gains.

A weaker-than-expected reading in the Conference Board's consumer confidence index contributed to the selling. The index fell to 97.1 in July from a revised 106.3 in June ­ its lowest level in five months and well below the 101.5 analysts forecast. The Conference Board said the decline reflected worries about the struggling stock and job markets.

The figure is closely watched since consumer spending, which accounts for two-thirds of the economy, is viewed as crucial if a recovery is to continue.

Wall Street was cheered, however, by the bill signed into law by President Bush.

Still, there were doubts the market would be able to sustain its advance, and stocks tended to succumb to selling whenever they made a moderate advance.

Analysts also hesitated to say a turnaround had begun. They noted that numerous rallies have fizzled during the past two years, and that could still happen to this one.

"The market is taking a pause today," said Tom Galvin, chief investment officer at Credit Suisse First Boston. "We're still at a very early stage of trying to define and solidify a market bottom, and it's too early to say we're recovering."

Merrill Lynch rose 25 cents to $36.50 after the brokerage firm denied it knowingly helped Enron distort its financial problems. In a statement submitted to a Senate subcommittee investigating the matter, the company defended its actions as appropriate.

Financial stocks were mixed. Citigroup rose 64 cents to $33.95, while J.P. Morgan Chase slipped 21 cents to $24.89.

Among tech stocks, Intel rose 8 cents to $18.97 and Ciena slipped 4 cents to $4.21.

AOL Time Warner rose 82 cents to $12.40 and AT&T gained 25 cents to $9.99 on word the two companies had put on hold plans for a stock offering of Time War-ner Entertainment, a jointly held company that controls HBO, Warner Bros. and Time Warner Cable.

Retailers struggled to keep up. Sears, Roebuck fell $1.49 to $48.26, while the Gap dropped 45 cents to $12.80.

Advancing and declining issues traded nearly evenly on the New York Stock Exchange. Volume was brisk.