Trading was choppy as investors digested a busy week of news, including the midterm elections. Many were still reacting negatively to the Federal Reserve's surprisingly large half-point cut in interest rates on Wednesday, analysts said.

"Investors are worried the economy isn't turning around like we had expected," said Matt Brown, head of equity management at Wilmington Trust.

The Dow Jones industrial average declined 49.25, or 0.6 percent, to close at 8,536.99, according to preliminary calculations. Earlier in the day, blue-chip stocks rose as much as 82 points.

The broader market also finished lower. The Nasdaq composite index fell 17.50, or 1.3 percent, to 1,359.21. The Standard & Poor's 500 index dropped 7.92, or 0.9 percent, to 894.73. For the week, the Dow rose 0.2 percent, the Nasdaq fell 0.1 percent and the S&P 500 dropped 0.7 percent.

The U.N. Security Council today unanimously approved a tough new Iraq resolution, aimed at forcing Saddam Hussein to disarm or face "serious consequences." Immediately afterwards, President Bush spoke from the White House Rose Garden warning Saddam to comply at once.

"It's very hard to get any sustainable rally with that negative cloud out there," Brown said. "I think the volatility is here to stay. But the outlook for us is that stocks are still better than bonds over the next year."

Meanwhile, McDonald's said it won't meet its 2002 earnings target and will close 175 restaurants, citing increased competition in a tough economic environment. Its shares fell $1.52 to $17.79.

"The McDonald's warning is a cause of concern," said Tony Cecin, director of institutional trading at US Bancorp Piper Jaffray. "It says this recovery is going to be slower and come in more fits and starts. Right now, the key ingredient is how to get business spending again."

Still, losses were somewhat limited, analysts said, by an underlying investor optimism following a four-week rally on better-than-expected earnings. Since hitting a five-year low on Oct. 9, the Dow has gained about 1,200 points, or 17 percent.

Investors also are hopeful that a Republican-controlled Congress after Tuesday's elections will back deeper tax cuts to help businesses.

Tenet Healthcare fell $13.05 to $14.90 after its chief operating officer and chief financial officer left the hospital chain amid an investigation by the federal government over its Medicare payments for costly procedures.

Gainers included Eli Lilly, which rose $3.28 to $62.24, after the pharmaceutical company said regulatory approval of three new drugs won't be affected by the manufacturing problems.