The Dow Jones industrial average declined for a second day after an industry report showed that manufacturing unexpectedly dropped in November. 3M and Caterpillar helped drag down the average.

The Dow fell 33.52, or 0.4 percent, to 8862.57. Johnson & Johnson, which said it would change the labeling of an anemia drug linked to a rare blood disorder, also contributed to the decline. 3M makes a variety of products, including Post-It Notes and television parts, and Caterpillar is the world's largest maker of earth-moving equipment.

The Nasdaq Stock Market composite index rose 6.00, or 0.4 percent, to 1484.78, led by Qualcomm. The Standard & Poor's 500-stock index fell 1.78, or 0.2 percent, to 934.53.

Within the first half-hour of trading, the Dow and S&P 500 rose 1.5 percent each in response to retailers' sales gains at the start of the holiday shopping season.

The benchmarks fell as the Institute for Supply Management's factory index stayed below 50, signaling a contraction, for the third straight month. November's reading was 49.2, below the average forecast of 51 among economists surveyed by Bloomberg. The Dow has gained eight straight weeks and is nearly 22 percent above the five-year low reached Oct. 9.

3M, which makes up 10 percent of the Dow, fell $1.50, to $128.35, and Caterpillar dropped 68 cents, to $49.22. Both were up before the manufacturing report.

International Paper, the world's largest paper company, declined 86 cents, to $38.39.

Johnson & Johnson fell $1.32, to $55.70. The company's Eprex anemia treatment was linked to more than 100 cases of a rare blood disorder and at least one death in Europe, prompting the drugmaker to change its European label.

Amgen, which sells a competing product, rose $1.37, to $48.57.

Schering-Plough dropped $1.16, to $21.50. The drugmaker may face competition for treating hepatitis C as Roche Holding AG is expected to win U.S. regulatory approval to market its therapy for the disease. Analysts said Roche may sell its treatment at a discount to capture half of the $2 billion market.

Wal-Mart Stores added 48 cents, to $54.38. The world's largest merchant reported a single-day sales record of $1.43 billion Friday, a 14 percent increase from last year's figure on the day after Thanksgiving. Sales figures for the start of the holiday shopping season may signal whether U.S. stocks can extend a two-month rally.

AT&T Wireless Services added 50 cents, to $8.05. Morgan Stanley named the company its "best idea" in the industry, as the brokerage raised its recommendation for North American mobile-phone service providers to "attractive" from "cautious."

Sprint's PCS wireless unit climbed 43 cents, to $6.19.

Motorola, the world's second-biggest mobile phone maker, rose 46 cents, to $11.70. Merrill Lynch increased its forecast for global sales of mobile phones and advised investors to buy shares in Nokia, Motorola's bigger rival.

American depositary receipts of Nokia climbed 94 cents, to $20.15. Qualcomm, the owner of patents for mobile phones used by 127 million people, added $1.47, to $42.69.

Telecommunications stocks including Sprint, Corning and Lucent Technologies are among the biggest gainers in the S&P 500 this quarter. While the stocks have at least doubled in the fourth quarter, they have still lost about half their value in 2002.

"The type of stuff that has been leading the rally has been the stuff that has imploded all year," said Charles White, who manages $2 billion at Avatar Associates. "I don't know what fundamental change . . . has gone on in the fiber-optic sector that is boosting Corning and Lucent."

Verizon Communications slid 53 cents, to $41.35 and SBC Communications declined 15 cents, to $28.35. Raymond James analyst Frank Louthan lowered the two largest local phone companies to "underperform" from "market perform."

UAL, parent of United Airlines, climbed 83 cents, to $3.28. The parent of United Airlines, the world's second-biggest carrier, said it reached a new cost-saving agreement with leaders of its mechanics union and won't seek bankruptcy protection today.

Other Indicators

* The New York Stock Exchange composite index fell 0.68, to 494.59; the American Stock Exchange index rose 0.34, to 813.00; and the Russell 2000 index of smaller-company stocks rose 2.18, to 408.54.

* Advancing issues outnumbered declining ones by 5 to 4 on the NYSE, where trading volume rose to 1.61 billion shares, from 643.5 million on Friday. On the Nasdaq, advancers narrowly outnumbered decliners and volume totaled 1.87 billion, up from 801 million.

* The price of the Treasury's 10-year note fell $1.25 per $1,000 invested, and its yield rose to 4.26 percent, from 4.22 percent on Friday.

* The dollar rose against the Japanese yen and fell against the euro. In late New York trading, a dollar bought 124.58 yen, up from 122.60 late Friday, and a euro bought 99.73 cents, up from 99.40.

* Light, sweet crude oil for January delivery settled at $27.24 a barrel, up 35 cents, on the New York Mercantile Exchange.

* Gold for current delivery rose to $317.60 a troy ounce, from $316.80 on Wednesday, on the New York Mercantile Exchange's Commodity Exchange. Trading was suspended Thursday and Friday for the Thanksgiving holiday.