NEW YORK (AP) - Caution returned to Wall Street yesterday as investors gave back some gains from last week's rally even as they found encouragement from President-elect Barack Obama's calls for an economic stimulus package.

Some retreat was to be expected after investors sent the Dow Jones industrial average to a two-month high on Friday; investors are wary about pouring more money into the battered market with economic data still generally weak.

Yesterday was the first real test of Wall Street in 2009 after many traders took extended vacations during the holidays, leading to light volume that may have exaggerated the market's move upward. Investors are still contending with fears about everything from the state of corporate earnings to consumers' willingness to spend during a recession.

"There is some optimism out there that there is going to be a massive stimulus package by Obama that is going to get passed and that will help the economy," said Greg Church, chief investment officer of Church Capital Management in Yardley, Pennsylvania.

Mr. Church warned, however, that a recovery will be difficult.

"The economy is still very weak. Unemployment is still high and is likely to get worse," he said.

Some analysts warned against drawing big conclusions from yesterday's trading.

"We're not reading too much into this market right now, especially after Friday's big gain," said Matt King, chief investment officer at Bell Investment Advisors. "There's just not a lot of conviction behind it."

"I do think there is an element of profit taking from Friday," when the Dow rose 258 points, he said.

According to preliminary calculations, the Dow fell 81.8, or 0.91 percent, to 8,952.89 after falling as much as 142.

Broader stock indicators showed more modest declines. The Standard & Poor's 500 index fell 4.35, or 0.47 percent, to 927.45, and the Nasdaq composite index fell 4.18, or 0.26 percent, to 1,628.03.

The Russell 2000 index of smaller companies fell 0.81, or 0.16 percent, to 505.03.

Despite the pullback in the major indexes, advancing issues outnumbered decliners by about two-to-one on the New York Stock Exchange, where volume came to 1.32 billion shares.

On Friday, the Dow registered its first close above 9,000 in two months. Last week, all the major indexes gained more than six percent, furthering a rally off multi-year lows that began November 20.

Bond prices pulled back yesterday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.46 percent from 2.39 percent late on Friday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.08 percent from 0.07 percent.

The dollar mixed against other major currencies, while gold prices fell.

Light, sweet crude rose $2.47 to settle at $48.81 a barrel on the New York Mercantile Exchange.

Analysts expect Wall Street will remain on edge in the coming months as companies release their quarterly results and, more important, their forecasts for the year. Economists are expecting terrible profit reports and cautious forecasts but anything worse than expected could rock the market.

Kim Caughey, equity research analyst at Fort Pitt Capital Group, said investors are already bracing for lackluster corporate results, a stance that could help Wall Street more easily absorb bad news. Since late November, a pessimistic market has been able to write off some bad economic readings as unsurprising.

"I think it may put a limit on the downside because we're already expecting things to be terrible. It's not going to take a whole lot to meet or exceed terrible," she said.

Ms Caughey warned, however, that modest expectations likely won't be enough to take the market higher.

"It's just going to limp along," she said of the economy.

Some stocks and sectors saw selling Monday as analysts issued downbeat forecasts. JPMorgan Chase & Co., which last year scooped up ailing banks Washington Mutual and Bear Stearns, fell after a Deutsche Bank analyst late Sunday reduced his 2009 profit forecast for the company. He predicts JPMorgan will see increases in soured loans. The stock fell $2.10, or 6.7 percent, to $29.25 and was the steepest decliner among the 30 stocks that make up the Dow industrials.

Another downgrade weighed on the telecommunications sector. Verizon Communications fell $2.16, or 6.2 percent, to $32.48, while AT&T Inc. fell 99 cents, or 3.4 percent, to $28.43.