Wal-Mart's warning about lower than expected August sales squelched the market's enthusiasm over falling oil prices. With its reach among consumers, Wal-Mart is seen as a barometer of an already struggling retail sector, and even the economy as a whole.

"I think you can make the case that Wal-Mart is related to oil, since oil prices have acted as a kind of tax on consumers that has restricted their spending," said Joseph Keating, chief investment officer at AmSouth

Asset Management in Birmingham, Ala. "I think this plays into people's concerns that earnings will be impacted. But we're also seeing oil fall, and barring

some sort of major supply disruption, I think they'll continue to fall."

October contracts for a barrel of light crude were quoted at $46.00, down 72 cents, on the New York Mercantile Exchange. With oil topping $49 per barrel last week, the downturn could encourage risk-tolerant investors to return to the market. However, very light volume meant most investors were sitting out Wall Street's traditional summer doldrums.

According to preliminary calculations, the Dow Jones industrial average dropped 37.09, or 0.4 percent, to 10,073.05.

Broader stock indicators were narrowly mixed. The Standard & Poor's 500 index fell 2.67, or 0.2 percent, to 1,095.68, and the tech-focused Nasdaq composite index was up 0.68, or 0.04 percent, at 1,838.70.

Wal-Mart lowered its August sales forecasts, citing lower back-to-school sales and lost business in Florida from Hurricane Charley. Sales at stores open at least a year — a standard for assessing a retailer's strength — are now expected to range from flat to 2 percent higher. Wal-Mart fell 85 cents to $53.80.

The retailer's outlook adjustment gave pessimists the chance to adjust their portfolios and take money out of the market, analysts said. Most investors, however, remained on the sidelines, and little movement in stocks was expected this week, given the Republican National Convention next week as well as the release of key employment data next Friday.

"Wal-Mart certainly has been the catalyst for people to reduce their exposure to stocks," said Hugh Johnson, chief investment officer at First Albany Corp. "Certainly, there are some worries out there that this will affect earnings in the third and fourth quarters. But we won't get a true reading on what's going to happen until after next week."

Declining issues outnumbered advancers by nearly 8 to 5 on the New York Stock Exchange, where volume was very light.

The Russell 2000 index of smaller companies was down 4.45, or 0.8 percent, at 543.47.