A burst of profit-taking sent stocks lower Tuesday as investors cashed in some of their winnings following two weeks of sizable gains.
The Dow Jones industrials fell 118 points.
"The market seems a little tired," said Michael Murphy, head trader at Wachovia Securities. "We've had a pretty good mood the last eight days.
"So some sort of pullback or digestion of the recent gains would be in order."
The Dow closed down 118.72, or 1.3 percent, at 8,872.07. That followed a 213-point, or 2.4 percent, advance Monday.
The broader market also was lower.
The Nasdaq composite index fell 17.95, or 1.3 percent, to 1,376.59, having risen 2.5 percent in the previous session. The Standard & Poor's 500 index declined 13.27, or 1.4 percent, to 937.43, following a gain of 2.4 percent.
Among the losers were companies that posted disappointing earnings results. Agilent Technologies Inc. -- down $1.24, to $16.20 -- and pharmaceutical company Andrx Corp. -- down 26 cents, at $23.82 -- fell on bigger-than-expected losses.
But analysts said investors remained fairly upbeat, a sentiment that has allowed the market's three major indexes to advance for two straight weeks, the first time since the two-week period ending March 8.
Still, they say stocks remain vulnerable to selloffs in the coming weeks, especially as some companies issue third-quarter profit warnings that will remind investors that the economy continues to struggle.
The market's upside is limited until there are concrete signs of an economic turnaround, analysts said.
"The lack of real economic news is basically setting the stage for the market to retreat and consolidate its gains," said Stephen Carl, principal and head of equity trading at The Williams Capital Group Inc., also in New York.
The Commerce Department reported that the U.S. trade deficit decreased marginally, to $37.2 billion in June, amid a surge in exports. But the report had little, if any, effect on trading.
The deficit still was the country's second-largest.
Tuesday's gainers included retailer Home Depot Corp., rising $1.22, to $30.25, on better-than-expected second-quarter earnings.
Qwest Communications Inc. advanced 71 cents, to $2.95, after saying it will sell its Yellow Pages business to a group of financiers for more than $7 billion.
Declining issues outnumbered advancers 4-to-3 on the New York Stock Exchange. Volume was light, as many investors were away on vacation.
The Russell 2000 index, which tracks smaller-company stocks, fell 3.45, or 0.9 percent, to 397.84.
Overseas, Japan's Nikkei stock average finished higher 0.22 percent.
In Europe, France's CAC-40 fell 1.5 percent, Britain's FTSE 100 declined 1.3 percent, and Germany's DAX index was down 1.8 percent.
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