"People are nervous about the Fed raising rates," said Mark Bronzo, who oversees $2.9 billion at Groupama Asset Management. If the Fed abandons its view that weak growth is the biggest risk to the economy "it will not be interpreted positively" by stock investors, he said.

The Dow, which has advanced five weeks in a row, lost 49.47, or 0.5 percent, to 10,557.76. It has gained 5.4 percent this year, helped by advances of more than 20 percent in General Motors Corp. and Boeing Co., manufacturers that stand to benefit from an economic rebound.

The Standard & Poor's 500 Index fell 2.67, or 0.2 percent, to 1,163.49, led by Microsoft Corp. The Nasdaq Composite Index rose 4.69, or 0.3 percent, to 1,872.99, after starting the day with a 1.3 percent gain. The Dow and S&P 500 also began the day higher.

Stocks early gains were fueled by comments from economists at Merrill Lynch and Salomon Smith Barney Inc., who said a stronger-than-expected economic rebound will lift corporate profits.

"We still are seeing markets rise on hope and expectations that sales will pick up and profit will improve based on positive economic data," said Michael Farr, who manages $350 million at the Washington-based firm of Farr, Miller & Washington. "We haven't seen it yet."

Earnings for S&P 500 companies are expected to fall 8.6 percent in the first quarter, their fifth consecutive decline, before rising 8.7 percent in the second quarter, according to Thomson Financial/First Call.

Wal-Mart, the largest U.S. retailer, dropped 81 cents to $62.94. Home Depot Inc., the biggest seller of home-improvement products, slid 62 cents to $48.30 and rival Lowe's Cos. declined

87 cents to $43.97.

Merrill analysts said they were reducing their rating on consumer discretionary stocks, which have led stock gains since September, to "underweight" from "equal-weight" and said they will likely raise their recommendation on energy stocks.

The S&P 500 has jumped

20 percent since reaching a three-year low on Sept. 21. An index of consumer discretionary stocks gained 36.7 percent in the same period and closed Friday at its highest level since August.

About 840 million shares traded on the New York Stock Exchange by 2:45 p.m. in New York, down

3 percent from a week ago. Advancing and declining stocks were about even on the Big Board.

Microsoft fell $1.24 to $61.25. Nine states that have called the software maker's proposed antitrust settlement with the Justice Department inadequate told a U.S. judge the company should forfeit its Internet Explorer.

Cendant Corp. advanced

26 cents to $19.12. The franchiser of the Avis rental car business and Century 21 real estate brokerages said first-quarter profit will exceed previous estimates by at least 50 percent because of better-than-expected revenue.