"The market scored such a healthy gain in October that we’re seeing a little bit of profit-taking as we wait for the rest of the third-quarter reports to come in," said Lynn Reaser, chief economist and senior market strategist at Banc of America Capital Management.

The Dow Jones industrial average closed down 9.93, or 0.1 percent, at 9,803.05, having gained 48.60 in the previous session to its highest close since May 31, 2002.

Broader gauges also declined. The Nasdaq composite index fell 4.09, or 0.2 percent, to 1,939.10, following an advance of 9.66 to its best finish since Jan. 28, 2002.

The Standard & Poor’s 500 index dropped 2.72, or 0.3 percent, to 1,046.76, having gained 4.13 in the previous session to its highest finish since May 31, 2002.

The Commerce Department reported today that the nation’s retail sales fell by 0.2 percent; the number was slightly worse than analysts’ estimates of a 0.1 percent dip. However, the government also revised sales figures upward for July and August to 1.4 percent and 1.2 percent, respectively.

Investors have pushed stocks to 52-week highs in recent days as investors become more confident that quarterly earnings will be better-than-expected. But analysts caution that the market could see declines if expectations become too high and companies don’t meet them.

"The markets right now are extended technically," said A.C. Moore, chief investment strategist for Dunvegan Associates in Santa Barbara, Calif. "I think there’s been a little bit of emotional buying in the last couple of sessions. That tends to result in somewhat of recoil or a settling down."

Reaser said she expects modest stock gains in the coming months, with a projected 1,100 level for the S&P 500 by year’s end.

"Most of this year’s gains have already been made," Reaser said. "The economy is just now showing evidence of significant acceleration with suggestions that the job market is finally beginning to turn higher. ... All of this speaks to more potential for increases in stocks."

Losers included General Motors Corp., which fell 42 cents to $43.55 even though the automaker reported a jump in profits that beat analysts’ projections.

Financial stocks also edged lower despite better-than-expected earnings. Wachovia Corp. slipped 2 cents to $44.29 and FleetBoston Financial Corp. fell 11 cents to $32.52.

IBM fell 16 cents to $92.74 in advance of the company’s quarterly earnings report. After the market closed, International Business Machines Corp. reported profits that met analysts’ estimates; its revenue, however, fell short of projections. The company’s shares continued their losses in extended-hours trading, falling $2.09.

But Intel gained 68 cents to $31.76 after the semiconductor maker reported that quarterly profits doubled, beating Wall Street’s forecast.