Updated from 1:05 p.m. EST

Stocks remained in a tight trading range, with the

Nasdaq

holding on to modest gains and the broader market falling on concerns about war and the economy.

The

Dow Jones Industrial Average

was last down 39 points, or 0.5%, to 7945, while the Nasdaq was up 4 points, or 0.3%, to 1305. The

S&P 500

fell 3 points, or 0.4%, to 839.

"Iraqi uncertainty, some earnings blunders and disappointing economic data are combining to produce another volatile trading session," said Bryan Piskorowski, market analyst at Prudential Securities. "Stocks have begun to stabilize, though trading remains overtly speculative in nature."

Piskorowski said Friday's employment report is adding to the inertia on Wall Street.

Secretary of State Colin Powell again pressed the case for war with Iraq Thursday as he testified before the Senate Foreign Relations Committee. On Wednesday, Powell played tape recordings and showed photographs to members of the United Nations in an attempt to prove that Iraq has been lying about its banned weapons program. In a separate development Thursday, North Korea warned of "total war" if the U.S. attacks its nuclear complex.

"Optimists hope that resolution to the uncertainty about war will prove an elixir for markets and the economy," said Morgan Stanley economist Richard Berner. "But war is not the only source

of the uncertainty. Financial restraint, a weak global economy and a mini-energy supply shock are all hurdles to acceleration."

The economic news was decidedly mixed Thursday. Productivity fell a seasonally adjusted 0.2% in the fourth quarter of 2002, the lowest reading since a 1.4% drop in the first quarter of 2001 and far below the 0.7% rise that economists had expected. Still, productivity rose 4.7% for the full year, the strongest showing since 1950.

In a sign that the labor market may be stabilizing, initial unemployment benefits claims fell 11,000 in the latest week to 391,000 from an upwardly revised 402,000 in the prior week. The four-week moving average, which smoothes out weekly fluctuations, declined 500 to a nine-week low of 384,750. Investors will get a clearer idea of the job picture with the release of Friday's jobs report.

A batch of retail sales did little to bolster spirits, with many coming in at the low end of expectations. Still, a few companies did raise their earnings estimates, helping the S&P retail index to climb almost 0.6%.

Wal-Mart

(WMT) - Get Report

said January same-store sales climbed 2.3%, compared with an 8.3% rise in the same period last year. Still, the world's largest retailer said it also expects to earn $1.80 a share for the fiscal year ended Jan. 31, up from a prior target of $1.76 to $1.78 a share. Shares rose almost 0.8% to $47.11.

J.C. Penney

(JCP) - Get Report

said same-store sales fell 3.8% for the four weeks ended Jan. 25 but it also raised expectations for the fiscal fourth quarter, saying it expects to earn at least 65 cents a share, compared with a consensus estimate of 63 cents. Shares fell 0.2% at $19.20.

U.S. stocks fell on Wednesday as Powell's speech before the U.N. Security Council failed to lift uncertainty about a war with Iraq. The Dow ended down 28 points at 7985, while the Nasdaq gave up 5 points to 1302.

The averages yo-yoed as the market changed its interpretation of Powell's address, which accused Iraq of hiding chemical weapons and obstructing U.N. inspectors. An initial blush of optimism gave way as the day progressed and members of the Security Council voiced varying levels of support for the U.S. allegations.

Although France, Russia and China said U.N. inspectors must be given more time in Iraq, the White House noted that the initial reactions to the briefing had been prepared before the speech, and they hope for a possible change of heart in the coming days.

Overseas markets were mostly lower, with London's FTSE 100 down 2% to 3597 even though the Bank of England dropped its main interest rate 25 basis points to 3.75%, citing concerns about lingering global economic weakness. The move was unexpected and happened at about the same time the European Central Bank said it was leaving its main rate unchanged 2.75%. Germany's Xetra DAX lost 3% to 2640. In Asia, Japan's Nikkei fell 0.8% to 8484, while Hong Kong's Hang Seng fell 0.6% to 9126.

Among major earnings reports out Thursday,

Gannett

(GCI) - Get Report

said it earned $1.29 a share on a 7% jump in year-over-year revenue;

United Online

(UNTD)

earned 20 cents a share on revenue of $65.8 million in its second quarter, both slightly better than expected, and guided higher for the third quarter; and

USA Interactive

(USAI) - Get Report

said it earned 17 cents a share in the fourth quarter on a 30% jump in revenue.

Shares of

Ericsson

( ERICY) rose 8% to $7.25 after naming a new president and CEO Carl-Henric Svanberg. Ericsson has fallen almost 11% this week after reporting a wider than expected fourth quarter loss and lowering its expectations for the full year.

Still,

El Paso

( EP) was down another 14% to $5.34 after slashing its dividend Wednesday.

Agilent

(A) - Get Report

plunged 23% to $12.54 after saying it expects a larger-than-expected first quarter loss as investors delay purchases.

Volume on the Big Board reached 906 million shares, with losers beating winners by 17 to 13. On the Nasdaq, 808 million shares changed hands, with declines outpacing advancers by 16 to 13.

Treasuries were firmer, with the 10-year note adding 5/32 to yield 3.98%.