An early rally in stocks ran out of steam and market indexes closed slightly lower yesterday after investors got spooked by news reports that U.N. inspectors had discovered empty chemical warheads in Iraq.

"The market got pulled back and forth not because of economic factors but because of the coming and going of news from Iraq," said Al Goldman, chief market strategist at the St. Louis brokerage firm A.G. Edwards & Sons.

Investors were also waiting for key technology earnings that would be reported after the market closed, according to analysts.

The Dow Jones industrial average declined 25.31 points, or 0.3 percent, to 8697.87. The Nasdaq Stock Market composite index finished at 1423.75, down 15.05 points, or 1 percent. The Standard & Poor's 500-stock index retreated 3.62 points, or 0.4 percent, to settle at 914.60.

Investors will face a torrent of corporate earnings over the next few weeks. Analysts said they were particularly focused on details about inventory, orders, a firm's ability to raise prices and any other hints that chief executives drop about future business.

"No single earnings report from a specific company is as important as the guidance the CEO and CFO are giving about future capital spending and research-and-development spending," said Charles Pradilla, chief investment strategist at SG Cowen Securities.

Analysts also predicted that investors' reaction to companies that beat expectations by a few pennies would be muted, because expectations have been falling. The expectations for fourth-quarter earnings growth was 20 percent last September but by last week had dropped to 12 or 13 percent, said Michael Sheldon, chief market strategist at Spencer Clarke LLC, a financial services firm based in New York.

In addition, Steven Wieting, a senior economist at Salomon Smith Barney, said he is not looking for significant revenue growth but rather for cutbacks that might signal improved earnings in the future. "We are very, very early in the recovery cycle right now," he said, adding that profit growth in the near-term will come from cost-cutting.

The Dow swung up 82.34 points in morning trading on positive economic news and favorable earnings reports from major companies such as United Technologies and Sears, Roebuck.

The consumer price index rose less in December than in November, lessening inflationary concerns, and a decline in weekly jobless claims indicated that the unemployment situation was not worsening, according to analysts.

United Technologies, which makes a wide variety of products, including elevators and helicopters, beat analyst estimates by 2 cents a share with fourth-quarter earnings of $1.06 a share. Sears, the department store and catalogue retailer, said its fourth-quarter profit vaulted 72 percent, to $848 million, or $2.67 a share, from $494 million, or $1.52 a share, last year, and handily beat forecasts. The earnings reports sent both stocks up, with United Technologies shares closing 2.8 percent higher, or $1.81, at $66.21, and Sears shares up $1.83, or 6.9 percent, at $28.53.

General Motors released fourth-quarter earnings of $1.02 billion, or $1.71 a share, a huge increase from $255 million, or 60 cents a share, a year earlier. Its fourth-quarter revenue rose 5.4 percent, to an all-time high of $186.8 billion, because of a huge increase in sales. But analysts worried that the company had to generate too many of those sales with profit-eating incentives and see little indication that it will be able to raise prices. GM also faced a $19.3 billion gap in pension funding at the end of 2002 and it expects its pension expenses to triple in 2003 over last year. GM stock fell 47 cents, to $39.73.

On Wednesday, Internet search firm Yahoo announced results that beat Wall Street expectations, but yesterday the company's stock fell 83 cents, or 4.2 percent, to $18.75. Analysts said many investors believe that the stock is still overvalued after its recent run-up.

Restructuring charges outweighed revenue at Apple Computer, which also reported results Wednesday. Apple's stock rose 19 cents, or 1.3 percent, to $14.62.

After the market closed, two key technology companies reported results that were slightly better than expected. Microsoft reported a profit that beat consensus estimates for earnings per share by a penny, but it reduced its earnings outlook for 2003, while IBM announced a fourth-quarter profit that was down sharply from the year before but beat analysts estimates by 4 cents per share.

Sun Microsystems reported quarterly losses that were more than five times what it suffered during the same period a year ago.

Other Indicators

* The New York Stock Exchange composite index fell 6.10, to 5165.35; the American Stock Exchange index rose 3.10, to 834.40; and the Russell 2000 index of smaller-company stocks fell 0.65, to 394.88.

* Advancing issues outnumbered declining ones by 8 to 7 on the NYSE, where trading volume rose to 1.53 billion shares, from 1.43 billion on Wednesday. On the Nasdaq, decliners outnumbered advancers by 11 to 9 and volume totaled 1.51 billion, down from 1.64 billion.

* The price of the Treasury's 10-year note fell $1.25 per $1,000 invested, and its yield rose to 4.08 percent, from 4.07 percent on Wednesday.

* The dollar fell against the Japanese yen and the euro. In late New York trading, a dollar bought 117.83 yen, down from 118.10 late Wednesday, and a euro bought $1.0617, up from $1.0547.

* Light, sweet crude oil for February delivery settled at $33.66 a barrel, up 45 cents, on the New York Mercantile Exchange.

* Gold for current delivery rose to $357.70 a troy ounce, from $350.70 on Wednesday, on the New York Mercantile Exchange's Commodity Exchange.