By Steve Gelsi

NEW YORK (Dow Jones) - Solar stocks on Friday gave back a big chunk of their eye-popping gains from the previous session as analysts sounded a cautious note on a rally sparked by an unexpected subsidy by China for its solar power industry.

Jefferies clean technology analysts Paul Clegg and Michael McNamara said Friday that a report on the Chinese Finance Ministry's Web site indicated that the government will offer a sizeable subsidy for the cost of installing solar arrays.

"This news may be incrementally positive for Chinese solar companies, but should still be treated with caution, given the surge in share prices, [and] the lack of key details about the subsidy structure," the Jefferies analysts said.

Shares of Suntech Power (STP) fell 9.7% to $10.19, the day after the leading China-based solar-module manufacturer, vaulted 44% to $11.29.

Solarfun Power Holdings Co. Ltd. (SOLF) dropped 12% to $4.48, giving back a chunk of its rise of 42% on Thursday.

China Technology Development Group Corp. (TRFDF) retreated 6% to $2.34, after gaining 13% on Thursday. JA Solar (JASO) fell 10% to $3.41 after rallying 42%. Trina Solar (TSL) dropped 12% to $10.73 on Friday, Yingli Green (YGE) dropped 8% to $5.52 and Akeena Solar (AKNS) declined 6% to $1.10.

Even U.S.-based solar firms got in on the act, with First Solar (FSLR) down nearly 5% to $143.37, the day after it rose 12%. SunPower (SPWRA) fell 7% to $24.80, after gaining 11%.

Jefferies noted that many details are missing in the subsidy plan, including the timing of the first payment, the limit of the program size, how the program will look in 2010 and conditions to qualify for the subsidy.

"If we take the subsidy at face value and assume no onerous conditions, it could lead to a near- or medium-term surge in Chinese demand for modules," Jefferies said.

The analysts concluded by recommending investors focus on the "operational stability" offered by First Solar. "We believe First Solar is best positioned to weather the storm," they said.

Meanwhile analysts at RBC Capital Markets and Friedman Billings Ramsey echoed much of the sentiment at Jefferies about the Chinese credit.

"We view the Chinese domestic subsidy action as an unexpected boost to global demand," RBC said. "Uncertainties persist, however....We also do not know if China will dictate a domestic-produced requirement as they have done for the wind industry."