NEW YORK (AP) - With the stock market in a bit of a news lull, investors decided to lock in some profits.

Stocks fell modestly yesterday in the absence of any major corporate or economic developments. Investors were also cautious ahead of earnings reports from major retailers and a two-day meeting of the Federal Reserve on interest rates that starts today. Bond prices jumped as stocks fell.

The day's selling was not surprising after major indicators shot up one percent last week, including a surge on Friday in response to the government's stronger-than-expected jobs report.

With employment and housing numbers looking better, consumers are likely to be one of the market's main concerns during August. Big retailers such as Wal-Mart Stores Inc. and Macy's Inc. report earnings this week, and others will release results in the coming weeks. There appeared to be some nervousness ahead of those reports, as retailers were among the biggest losers yesterday.

What stores have to say about their expectations could help stocks extend their summer rally or stifle it. "There's less emphasis on earnings and more emphasis on outlooks," said Bryan Place, principal at Place Financial Advisors.

Investors also will look to the Fed for indications of how the economy is faring. It is widely expected the Fed will keep key interest rates steady at near zero, but Wall Street will be paying more attention to the economic assessment the Fed issues with its rate decision rather than the decision itself.

"People want to see some words - some confidence - coming out of the Fed that the economy is improving," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research in Cincinnati.

According to preliminary calculations, the Dow Jones industrial average fell 32.12, or 0.3 percent, to 9,337.95. The Standard & Poor's 500 index fell 3.38, or 0.3 percent, to 1,007.1, while the Nasdaq composite index fell 8.01, or 0.4 percent, to 1,992.24.

Eight stocks fell for every seven that rose on the New York Stock Exchange, where volume came to a light 1.09 billion shares.

In bond trading, the yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.77 percent from 3.86 percent late on Friday. The gains follow a steep drop Friday after the employment hurt demand for the safety of government debt. Investors are also bracing for a record $75 billion auction of debt this week that starts today.

Analysts said the stock market's occasional retreats have been small in the past month and likely will continue to be mild because investors and money mangers who missed the rally have been buying when the market dips.

Traders say the pause in the gains is welcome after the S&P 500 index jumped 15 percent in just four weeks and 49 percent from a 12-year low in early March. Major indexes ended on Friday at their highest levels since last fall.

"Taking a break is a good thing or else we'd see valuations exceeding fundamentals a little bit too much," said Jeffrey Phillips, chief investment officer at Rehmann Financial in Troy, Mich.

Investors will be looking for direction from the Fed's economic statement. Even if areas like housing and unemployment continue making gradual improvements, traders have other worries.

Banks still have billions of dollars in bad debt and the Fed said in a snapshot of economic conditions at the end of July that commercial real estate activity continues to weaken.

Analysts are still concerned about how and when policymakers will withdraw the enormous support the Fed erected in haste in the fall to prop up the financial system and the overall economy.

The economy must first be stable enough to withstand an increase in interest rates that would boost borrowing costs, including mortgage rates.

In corporate news, McDonald's Corp. said sales at restaurants open at least 13 months rose 4.3 percent in July. The nation's largest hamburger chain rose $1.07, or 1.9 percent, to $56.27.

Among other retail stocks, Macy's fell 76 cents, or 4.75 percent, to $15.23. Best Buy Co. fell $2.09, or 5.26 percent, to $37.66.

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

Light, sweet crude fell 33 cents to settle at $70.60 a barrel on the New York Mercantile Exchange.

The Russell 2000 index of smaller companies fell 0.53, or 0.1 percent, to 571.87.

Overseas, Asian markets rose on a positive report on Japanese machinery orders, a key indicator of corporate capital spending. Japan's Nikkei stock average rose 1.1 percent.

Britain's FTSE 100 slipped 0.2 percent, Germany's DAX index lost 0.8 percent, and France's CAC-40 fell 0.5 percent.