Investors were also collecting some profits from the market's recent advance, but in general, refrained from making any major bets.

The Dow Jones industrial average eked out a gain of 1.09, or 0.01 percent, to close at 8,785.98, according to preliminary calculations. The Dow ended last week with a gain of 2.1 percent, its second consecutive weekly advance.

But the market's broader gauges were lower. The tech-focused Nasdaq composite index fell 1.64, or 0.1 percent, to 1,446.08, having soared 4.4 percent last week. The Standard & Poor's 500 index declined 1.30, or 0.1 percent, to 926.27, having advanced 2.1 percent last week.

Investors were trading cautiously after Wall Street's big New Year's rally, which was fed in part by President Bush's $674 billion tax-cut proposal. The recent buying also was attributable to portfolio managers who typically begin the year buying stocks to replace shares sold by the end of December.

Analysts said today's lackluster tone wasn't worrisome given the market's recent gains, made even stronger because trading volume, anemic throughout the winter holidays, has picked up.

"There is a positive tilt to the market. The tone is better and the flow of funds has improved," said Alan Ackerman, executive vice president of Fahnestock & Co. "It has given many the feeling that we could have better weeks ahead."

In general, analysts say investors are growing more optimistic about the market's prospects and that they should be. So far this year, the Dow has gained 5.3 percent, while the Nasdaq has climbed 8.3 percent and the S&P has risen 5.3 percent.

"I think investors are set to see more of this in the months ahead," said Kevin Caron, a market strategist with Ryan, Beck & Co., LLC.

Caron said his firm anticipates the S&P, one of the broadest measures of the market, ending 2003 at 1,150, a premium of nearly 31 percent over last year.

"That may seem like a lot, but when compared with the lousy three-year bear market investors have had to endure, it is not that much at all," he said.

Dell Computer declined $1.17 to $25.98 after J.P. Morgan downgraded it to "neutral" from "buy."

Johnson & Johnson fell $1.16 to $56.04 after Thomas Weisel Partners cut its rating on the stock to "attractive" from "buy."

Federated Department Stores declined 44 cents to $30.58 after the retailer said it expects January same-store sales, those at stores open at least one year, to be down by 4 percent to 5 percent.

But AOL Time Warner rose 15 cents to $15.03 on news that chairman Steve Case was stepping down, a move many shareholders believe will lift its sagging stock price.

Microsoft advanced 47 cents to $56.39 ahead of its fiscal second-quarter earnings results due to be released Thursday.