"I am glad to see a pause in here. The last thing we need is for the market to get ahead of itself," said Joseph Keating, chief investment officer at AmSouth Asset Management in Birmingham, Ala.

Freddie Mac's dismissal of its president and an earnings warning from Motorola contributed to the decline. Still, analysts said investors remain confident that the market and the economy have turned a corner and the analysts noted that the slippage was moderate.

The Dow Jones industrial average closed down 82.79, or 0.9 percent, at 8,980.00, according to preliminary calculations ­ following a stunning week in which it closed above 9,000 for the first time in nearly 10 months and ended with a 2.4 percent gain.

The broader market also retreated. Having advanced 2 percent last week, the Nasdaq composite index fell 23.45, or 1.4 percent, to 1,603.97. The Nasdaq is trading at levels not seen since May 2002.

The Standard & Poor's 500 index declined 11.83, or 1.2 percent, to 975.93, following its own stellar week in which it traded above 1,000 for the first time in almost a year and gained 2.5 percent. The S&P is at levels not seen since July.

Analysts said the market was due for some natural pullback following weeks of heavy buying.

"It came too far, too fast," said Hugh Johnson, chief investment officer at First Albany Corp.

By the end of Friday's trading, the Dow had risen 20.4 percent, the Nasdaq had gained 28 percent and the S&P had climbed 23.4 percent since March 11, when the buying began.

Plenty of positive factors have been fueling the upswing.

Most companies reported better-than-expected first-quarter earnings, the war in Iraq was quick, and economic data has been strengthening. Federal Reserve chairman Alan Greenspan has made several upbeat assessments of the economy lately and President Bush signed into law a 10-year, $350 billion tax cut package, which includes lower rates on stock dividends.

"The reduced tax rate on dividends is acting as a catalyst for the market," Keating said. "It has caused people to once again look at common stock investments. It has pulled money off the sidelines."

Financial stocks turned lower today on news that mortgage lender Freddie Mac's president and chief operating officer, David Glenn, was fired because of questions involving his cooperation with the directors' audit committee counsel. The company also said chairman and chief executive Leland Brendsel had resigned, as had Vaughn Clarke, the executive vice president and chief financial officer.

Freddie Mac dropped $9.61, or 16.1 percent, to $50.26.

Other financial issues suffered, including Fannie Mae, which slid $3.63 to $71.31, and Countrywide Financial, which fell $1.49 to $74.58.

Among other losers, Motorola declined 21 cents to $8.68 after cutting its quarterly and annual sales and earnings estimates.

Brokerage house downgrades hurt other individual stocks.

Check Point Software fell 95 cents to $19.23 after Credit Suisse First Boston lowered its rating to "underperform" from "neutral."

Extreme Networks declined 55 cents to $6.10 after RBC Capital Markets downgraded it to "underperform" from "sector perform."

Declining issues outnumbered advancers more than 2 to 1 on the New York Stock Exchange. Volume was light.

The Russell 2000 index, the barometer of smaller company stocks, fell 9.15, or 2 percent, to 444.79.