Wall Street's drive to new highs lost momentum on Friday, as the regular expiration of key stock-index options spawned a strong wave of automatic selling late in the day.
The Dow industrials sank 33.98 points to 3,953.54, with most of that decline occurring in the final hour.
The broad market also was lower, in part unnerved by a sharp decline in shares of technology bellwether Motorola.
Analysts said profit-takers had control of stocks from the opening bell on Friday but that the heaviest selling was technical in nature, tied to the normal unwinding of option-related market bets.
Thus, many Wall Streeters were reluctant to declare an end to the recent rally, which took the Dow as high as 3,998 in intra-day trading on Wednesday. The Dow's gain for the week was 14.47 points.
"We're still of the opinion that after both stocks and bonds have had such strong moves, you would expect a pause and it really isn't cause for concern," said Douglas Cliggott, senior investment strategist at Merrill Lynch.
Some analysts, however, said the 4,000-Dow barrier may be turning into a formidable roadblock.
"I think it's going to be a tough barrier to break," said Alice Sadlo, analyst at McDonald & Co.
Neither the bond market nor the dollar was much help to stocks Friday. Bond yields closed modestly higher, while the dollar eased slightly after diving Thursday on concerns about the cost of the proposed U.S.-led financial bailout of Mexico.
Meanwhile, though investors were somewhat encouraged Friday by the government's report that the U.S. trade deficit narrowed in December, the full-year deficit was well above 1993 levels--reminding Wall Street of the trade imbalance's long-term threat to the economy.
But traders said a more disturbing piece of news for stock investors was Motorola's announcement that inventories of its cellular phones have been mounting at distributors, suggesting unexpected weakness in cellular sales.
Motorola said it has no plans to take any special charges against earnings because of the inventory glut, but Wall Street fears that the firm's earnings will be crimped in the near term. The stock tumbled 6 3/8 to 57 7/8 in wild trading.
The company's surprise announcement also raised concerns about slower sales of telecom equipment, computers and technology products in general. Tech stocks have been market leaders for the past year, so a selloff in those shares could undermine the market as a whole.
On the Big Board on Friday, declining issues outnumbered gainers by 12 to 9 in heavy trading. In the Nasdaq market of mostly smaller stocks, the composite index fell 6.34 points to 786.97.
Among Friday's highlights:
* Suppliers of cellular phone parts and systems slumped with Motorola. Three-Five Systems tumbled 3 5/8 to 26 1/8, Atmel lost 1 1/2 to 31 3/4 and DSC Communications fell 2 7/8 to 36 1/8.
* Other technology stocks losing ground included Compaq, down 1 1/4 to 36 5/8; Cabletron Systems, off 2 3/8 to 40 3/8; IBM, down 1/2 to 75, and Texas Instruments, down 2 to 78 1/4.
* Among phone utilities, Bell Atlantic slid 1 3/8 to 52 1/8, US West dropped 1 1/8 to 37 3/4 and Ameritech gave up 1 1/4 to 41 7/8.
* Williams-Sonoma, the cookware retailer, plunged 3 to 21 1/4 after some analysts cut fourth-quarter earnings estimates, citing concerns that the company's costs were higher than expected in the quarter as it struggled to keep up with robust product demand.
* On the plus side, major drug stocks rallied on a bullish outlook from Merrill Lynch. Pfizer rose 1 to 81 3/8, Merck gained 7/8 to 41 3/8 and American Home Products surged 1 5/8 to 71 1/8.
* Among Southland issues, L.A. Gear eased 1/8 to 4 1/4, its 52-week low. The athletic shoe maker reported lower sales in the recent quarter, and a loss of 73 cents a share.
Overseas, Tokyo's Nikkei-225 index rebounded 239.92 points to 18,020.51, while London and Frankfurt stocks were little changed.
Some Latin American markets rallied as Mexican shares stabilized. Brazil's Bovespa stock index jumped 5.5% and Argentina's Merval index soared 6.7%.