American stocks failed to hold gains yesterday, sending the Dow Jones Industrial Average lower on concern that Senator John Kerry would unseat President George W. Bush.

The Standard & Poor’s 500 Index erased most of its advance, and the Dow average snapped a five-day rally in the last 90 minutes of trading.

Speculation that exit polls showed Mr. Kerry with a lead in the presidential election spurred the retreat.

“There’s the old saying that the market favors Republicans and incumbents, and the fact that we opened stronger shows (Mr. Bush) was still favored,” said Brian Pears, head of equity trading at Victory Capital Management, which has $46 billion in Cleveland. “It looks like Kerry is doing better than expected and that caused a sell off.”

The Dow average shed 18.66, or 0.2%,to 10,035.73. The S &P 500 was little changed, up 0.05 at 1130.56. Drugmakers such as Pfizer Inc. and utilities including Duke Energy Corp. weighed on the benchmark on concern that the policies of a Kerry administration would hurt those industries. The Nasdaq Composite Index added 4.92, or 0.3%, to 1984.79.

Ten stocks fell for every nine that rose on the New York Stock Exchange. Some 1.67 billion shares changed hands on the Big Board, 25% more than the three-month daily average.

The Dow average had risen as much as 0.8%, while the S &P 500 climbed 0.9% on the prospect that the aftermath of the election would produce a market rally and as oil prices declined. Speculation that Mr. Kerry was leading Mr. Bush in some swing states prompted the sell off.

Mr. Kerry led Mr. Bush by 18.1 percentage points in trading on the Iowa Electronic Markets, a nonprofit political betting system run by the University of Iowa, as of 4 p.m. New York time.

Mr. Kerry held a 16 percentage-point lead on Intrade, an electronic betting exchange based in Dublin known by its Web site TradeSports.com.

Two hours earlier, Mr. Bush had a 3.8 percentage-point advantage over Mr. Kerry on the Iowa market and a 13.5 percentage-point lead on Intrade.

“There is some concern about change,” said Wayne Reisner, who helps manage $1.8 billion at Carret Asset Management LLC Co. in New York. “It’s fear of the unknown – better the devil you know.”

Some investors, including SouthTrust Bank of Alabama’s Jon Goebel, said stocks may decline if the challenger wins.

“With Kerry there’s the possibility of higher taxes next year,” said Mr. Goebel, who oversees $5 billion as the firm’s chief investment officer. “You’d like to think this is already reflected in the market, but I think it isn’t.”

A Kerry victory would spur a decline of as much as 5% in stocks, according to a report last week by Tobias Levkovich, chief American equity strategist for Citigroup Global Markets Inc. He did not specify the timeframe for such a move.

Pfizer, the world’s biggest drugmaker, fell 10 cents to $28.70, while Merck & Co. lost $1.48 to $26.80. An S &P 500 index of drug makers dropped 1.1% on concern that Kerry would allow health plans to negotiate lower prices with drug companies.

An index of utility companies, whose shares are attractive to investors because of their dividends, had the biggest decline among the S &P 500’s 24 industry groups. The gauge dropped 1.7% because a Kerry administration may seek to roll back Mr. Bush’s dividend-tax reduction.

Duke, the no.1American utility own er, slid 56 cents to $24.32. TXU Corp., owner of Texas’s largest power company, shed $1.43 to $59.60. Duke and TXU pay dividends equal to 4.5% and 3.8% of their share prices, respectively, compared with the S &P 500’s 1.7% dividend yield.

Energy companies, which would stand to gain from Mr. Bush’s efforts to increase oil production and exploration, fell. Nabors Industries Ltd., the world’s largest onshore oil and naturalgas driller, slid 96 cents to $47.55.

A drop in oil prices also sent the group lower. Crude oil for December delivery fell 1% to $49.62 a barrel in New York. Oil last closed below $50 on Oct.4.

Shares of gold miners retreated as gold prices in New York had their biggest drop in more than two months. Gold for December delivery fell 1.7% to $420.80 an ounce, the steepest decline since August 24. Gold futures last week closed at a 15-year high as some investors bought the metal on concern about the American election’s outcome.

The S &P 500 shares, called Spiders, added 4 cents to $113.55. Nasdaq-100 tracking shares, known by their QQQ symbol, rose 12 cents to $37.16.

S &P 500 futures expiring in December shed 0.20 to 1130.60 on the Chicago Mercantile Exchange. Nasdaq-100 Index futures rose 6.50 to 1498.00.

The Russell 2000 Index, which tracks companies with a median market value of about $472 million, fell 0.3% to 585.44. The Dow Jones Wilshire 5000 Total Market Index, the broadest measure of U.S. shares, retreated 6.12, or 0.1%, to 11,057.70. Based on changes in the Wilshire, the value of stocks decreased by $7.34 billion.