Flaccid September retail sales contributed to the malaise.

Investors were newly uneasy about drug stocks after a new scientific study showed that Pfizer's Celebrex could cause cardiovascular problems similar to those caused by Merck's Vioxx, which was pulled from the market last week after Merck found a heightened risk of heart attack and stroke. The news fed selling in the rest of the drug sector.

Investors also bid stocks lower as oil prices reached a record $53 per barrel in intraday trading, as production problems in Russia, Nigeria and the Gulf of Mexico combined to spark another wave of speculation. A barrel of crude oil settled at $52.67, up 65 cents, on the New York Mercantile Exchange.

"Oil continues to be the big story here, and it's going to be hard for the markets to break out of a range while this continues to be a problem," said Joseph Battipaglia, chief investment officer at Ryan Beck & Co. "It adds to the uncertainty in the market over earnings and the election."

According to preliminary calculations, the Dow Jones industrial average fell 114.52, or 1.1 percent, to 10,125.40.

Broader stock indicators were also sharply lower. The Standard & Poor's 500 index was down 11.40, or 1 percent, at 1,130.65, and the Nasdaq composite index lost 22.51, or 1.1 percent, to 1,948.52.

Pharmaceutical stocks dropped as the New England Journal of Medicine reported its findings on the possibility of cardiovascular risks connected to Pfizer's Celebrex. Pfizer, which had risen after Merck pulled Vioxx from the market last week, slumped $1.19 to $29.99, while Merck dropped 69 cents to $30.98.

Other drugmakers also fell as investors worried that their products would also face more intense scientific scrutiny. Eli Lilly & Co. slid $1.91 to $59.56, AstraZeneca PLC lost 84 cents to $38.80, and GlaxoSmithKline PLC fell $1.15 to $41.90.

"A lot of the weakness we're seeing today has a lot to do with the drug stocks," said Todd Leone, managing director of equity trading at SG Cowen Securities.

A mediocre retail sales report for September led to new fears that rising oil prices would continue to limit consumer spending with the fourth-quarter's all-important holiday shopping season coming up.

Results at most major retailers were mixed.

Investor concerns about the economy were assuaged somewhat as the Labor Department reported a steep drop in first-time unemployment claims.