Analysts said investors might be trying to capture profits following the previous session’s advance, and remain uncertain about whether gains will hold through the holiday season.

"The market is searching for every shred of evidence on how the retailers are going to do," said Lynn Reaser, chief economist and senior market strategist at Banc of America Capital Management. "There is some nervousness about where exactly Mr. and Mrs. Consumer are going to be shopping."

The Dow Jones industrial average was up 39.40, or 0.4 percent, at 10,047.56. The index of 30 actively traded blue-chip stocks gained ground yesterday on a strong retail sales report and suggestions from the Federal Reserve that interest rates wouldn’t rise anytime soon.

The broader market gauges also drifted higher later in the day. The Nasdaq composite index was up 3.84, or 0.2 percent, at 1,946.16. The Standard & Poor’s 500 index was up 3.47, or 0.3 percent, at 1,074.68.

Wall Street welcomed a government report that wholesale prices declined more than expected, suggesting inflation remains well under control, and appeared unconcerned about news that the trade deficit had widened slightly. But stocks stumbled a bit after a survey by the University of Michigan said consumer confidence was on the wane.

The university’s preliminary report for December was said to have shown a sharp decrease in consumer sentiment, to 89.6 from 93.7 in November, Dow Jones Newswires reported, citing people who had seen the data. Analysts had forecast a reading of 95.2 for mid-December. The survey is released only to subscribers.

"Of the three reports, that was the most important and probably dampened some of the enthusiasm that surfaced yesterday with the retail sales report," Reaser said. "We still need to see whatever revisions there are to be made and how consumers actually behave."

Earlier, the Labor Department reported a 0.3 percent drop in the Producer Price Index, which measures prices of goods before they reach store shelves. Economists had forecast a 0.1 percent rise. The news bolstered hopes that interest rates would stay low.

Separately, the Commerce Department said the trade deficit soared to $41.77 billion in October. Shoppers’ preference for imports hit a record high, offsetting a sizable gain in exports, including the best showing for sales of farm products in seven years. The October trade imbalance was up 1 percent from a September deficit of $41.34 billion and was the biggest deficit in five months.

The Fed decided earlier this week to keep the short-term interest rate for overnight loans at 1 percent. Minutes from an October Fed meeting, released yesterday, further clarified its position that rates shouldn’t rise for some time, and helped tip the Dow over 10,000.

"The real resistance level now will be 10,150," said Tim Smalls, a trader at SG Cowen Securities. "People are still very skeptical after losing money over the last four years, but this market is slowly winning them over."

Still, some blue chip stocks saw declines today, including Wal-Mart Stores Inc., the world’s largest retailer, which lost 42 cents to $52.39.

AT&T Corp. was down 61 cents at $19.02 after lowering the revenue outlook for its business services unit, citing pricing pressures. The telecommunications company said would adopt an aggressive strategy to fight competition, and would increase layoffs to 12 percent from 10 percent to lower costs.

Advancers included Coca-Cola Co., which gained $1.07 to trade at $49.46 after saying it was "poised for a strong year" ahead of a meeting with analysts in New York. The beverage company forecast long-term earnings-per-share growth of 11 to 12 percent, and expects cash from operations to remain strong in 2004.

General Motors Corp. rose 86 cents to $49.79 after saying it expects its U.S. hourly and salaried pension plans to be nearly fully funded by the end of 2003. The news means GM probably won’t have to make more cash contributions to the plans until at least 2010, based on planned additional contributions this year and normal asset returns.

Advancers outnumbered decliners about 3 to 2 on the New York Stock Exchange. Volume was lighter, with 909.69 million shares traded, compared with 1.08 billion shares at the same point yesterday.

The Russell 2000 index, which tracks smaller company stocks, was up 1.75, or 0.3 percent, at 544.67.