Analysts said investors opted to cash in profits after pushing stocks higher for several weeks on better-than-expected earnings. Many are now looking for signs of continuing economic growth and the retail report failed to provide that, they said.

"People want a reason to be bullish, and unfortunately we just don't have the compelling evidence to have a sustainable new trend here," said Charles White, portfolio strategist at Avatar Associates.

"That said, we're probably a couple of good pieces of news on the economy away to be able to find a catalyst to break us out" much higher, he said.

The Dow Jones industrial average closed down 31.43, or 0.4 percent, at 8,647.82, having declined 47 points in the previous session.

The broader market also fell. The Nasdaq composite index dropped 4.77, or 0.3 percent, to 1,534.91. The Standard & Poor's 500 index declined 3.02, or 0.3 percent, to 939.28.

The Commerce Department report on April sales by the nation's retailers showed a slip of 0.1 percent, compared to a 2.3 percent gain in the previous month. Excluding sales at gasoline stations, retail sales went up by a modest 0.4 percent in April; analysts were expecting overall retail sales to rise by 0.4 percent.

Analysts say that after encouraging first-quarter earnings in recent weeks, investors are generally more upbeat about the economy rebounding later in the year. But analysts caution that the market could see pullbacks in the weeks ahead on profit-taking and mixed economic data.

"We feel like the market will be stuck pretty much in a trading range for the rest of the year," with the upper limit of the S&P 500 around 960, said John Caldwell, chief equity strategist for McDonald Financial Group, part of the Cleveland-based KeyCorp.

"What we worry about is folks getting too optimistic," he added. "Cautious optimism is our outlook for the year, because we do see better days ahead. We're worried folks may be getting a little too ahead of us."

Decliners included Applied Materials, which fell 59 cents to $14.97, after the maker of semiconductor equipment reported a quarterly loss; excluding one-time charges, however, it posted earnings that beat analysts' expectations by a penny.

Federated Department Stores dropped 75 cents to $31.70 after the operator of the Macy's and Bloomingdale's department stores posted quarterly earnings that came in slightly higher than expectations, although its revenue fell below estimates.

But Tiffany climbed $2.99, or 10.7 percent, to $30.93 after the jeweler reported first-quarter profits that beat Wall Street's estimates by a penny.

Computer Sciences rose $3.27 to $37.30 after the technology-services company reported fiscal fourth-quarter profits that beat analysts' expectations.