NEW YORK — Stocks fell moderately yesterday as news of job cuts at Merck & Co. and a mixed holiday sales snapshot prompted Wall Street to take a breather from its recent five-week rally.

The market was coming off seven consecutive trading days of gains amid a year-end rally that vaulted the Standard & Poor's 500 and Nasdaq composite indexes to four-year highs, fed by an improving economic landscape and mounting eagerness for strong sales in December.

But while some retailers reported a solid opening to the holiday season, other merchants said shopper traffic tailed off once Friday's bargains passed. Retail stocks fell despite better-than-expected figures by Wal-Mart Stores Inc. and J.C. Penney Co.

Despite a clouded holiday retail sales outlook, Steve Neimeth, of AIG SunAmerica, said the broader picture remains positive.

"Bottom line, the consumer is extremely healthy and sentiment is good," Neimeth said. "I believe they will be spending heavily this year, and that December retail sales will beat expectations."

The Dow Jones industrial average lost 40.90, or 0.37 percent, to 10,890.72. The S&P 500 slid 10.79, or 0.85 percent, to 1,257.46. The Nasdaq was down 23.64, or 1.04 percent, to 2,239.37.

Bonds advanced, with the yield on the 10-year Treasury note falling to 4.41 percent yesterday. The dollar was mixed against other currencies, Gold prices were little changed.

A barrel of light crude dropped $1.35 to settle at $57.36 on the New York Mercantile Exchange.

Declining issues led advancers by 11 to 5 on the New York Stock Exchange, where preliminary consolidated volume came to 2.03 billion shares, compared with 722 million shares on Friday, when the markets closed early. On Wednesday, the last full day of trading, volume was 2.01 billion shares.