Trading was tentative and lackluster, a sharp contrast to the previous session when the market enjoyed its best day in more than two months following an unexpected jump in manufacturing activity.

Analysts were heartened that despite Home Depot's warning, the market's declines today were modest.

"The market has held up rather nicely. We have entered the year with people optimistic that we are not going to have a fourth negative year for the overall market," said Brian Bush, director of equity research, Stephens Inc.

The Dow Jones industrial average closed down 5.83, or 0.1 percent, at 8,601.69, according to preliminary calculations. The decline followed yesterday's 265.89-point surge, which was the Dow's best one-day gain since Oct. 15.

The market's broader gauges were mixed, the day after posting their biggest one-day gains since Oct. 15. The Nasdaq composite index rose 2.17, or 0.2 percent, to 1,387.02. The Standard & Poor's 500 index declined 0.43, or 0.1 percent, to 908.60.

The indexes posted gains for the week due to advances in the three previous sessions, including yesterday's big rally. For the week, the Dow rose 3.6 percent, the Nasdaq climbed 2.9 percent and the S&P advanced 3.8 percent. All three indexes were down the previous week.

Bush noted that the stock indexes have held onto the bulk of their big October-November rally, which came after they'd fallen to five- and six-year lows. The Dow is 18 percent above the five-year low of 7,286.27 it hit on Oct. 9. The Nasdaq is 24 percent above and the S&P is 17 percent above six-year lows also made on Oct. 9.

But analysts also said the market needs more upbeat news about earnings and the economy before embarking on another upward trend or breaking its three-year losing stretch.

"You wouldn't expect to have multiple days up, especially with Home Depot's earnings warning and slack December retail sales," said Brian Bruce, director of global investments, PanAgora Asset Management Inc. in Boston. "A day like (yesterday) is almost an anomaly until sentiment changes and people become more positive."

Investors are particularly sensitive to disappointing news involving consumers, whose spending accounts for two-thirds of the economy.

Home Depot, which late yesterday cited slow holiday sales as it cut its earnings estimates for the fiscal year ending in February, dropped $3.50 to $21.38 today.

Additionally, Bear Stearns and Deutsche Securities each downgraded Home Depot, while Banc of America Securities downgraded rival Lowe's, which then fell $2.45 to $36.90.

After three years of dismal declines, investors are wary about 2003 and are postponing committing to the market ahead of first-quarter earnings results, which companies will begin releasing in earnest in two weeks.

Winners today included Walgreen, up $2 at $32.10 on quarterly earnings that were a penny a share higher than analysts had expected.

Apparel retailer Kenneth Cole advanced $1.56 to $23.56 after raising its fourth-quarter profit and revenue estimates.

Advancing issues had a narrow lead over decliners on the New York Stock Exchange. Trading volume was light.

The Russell 2000 index, the barometer of smaller company stocks, fell 2.27, or 0.6 percent, to 390.31.