NEW YORK, JUNE 26 -- The Dow Jones industrial average closed off 2 points today despite an explosive morning bond market rally prompted by President Bush's statement that he would accept higher taxes as part of a budget compromise.

News that Bush had changed his hard-line stance on taxes immediately sent bond prices higher in expectation that a budget pact would lead quickly to lower interest rates. Stocks initially followed bonds sharply higher as the Dow surged 31 points. But while bonds held onto more than half their gains into late afternoon, stocks slowly surrendered their entire advance and even posted a 6-point loss in the last minutes of trading.

Some traders said they were torn between their love of lower interest rates and their dislike of higher taxes. Typical of many midday reactions to the new Bush tax stance was that of Nikko Securities strategist Walter Baumann: ''So much for the 'peace dividend.' The Cold War has finally come to an end, yet our taxes are going up. The market is viewing this development with very mixed emotions.''

Money managers with high cash and bond positions appeared particularly unimpressed with the budget-accord development. One of those managers, James D. Wright of the $1.2 billion Banc One Asset Management Corp. of Columbus, Ohio, said, ''We've been at a low 40 percent equity position {in balanced portfolios}, and although I'm personally getting sick of it, most models still favor bonds over stocks here."

Concern about disappointing profits also may have played a role in the day's backsliding on stocks. At the close, the Dow stood at 2842.33, down 2.72, while gain-loss ratio deteriorated markedly after the opening. Declining issues outnumbered advancing ones by a ratio of about 7 to 6, on moderate volume of 141 million shares.

The Dow transports lost 12.04 to 1135.77. The interest-sensitive utilities inched up only 0.06 to 206.93. Among broad stock indexes, the Standard & Poor's 500 was down 0.25 at 352.06, the NYSE Composite was down 0.13 at 192.47, the Value Line was down 0.20 at 282.78, the Amex Market Value was down 0.59 at 356.80 and the Nasdaq Composite was down 0.26 at 455.38.