Investors grew more cautious through the session as oil prices climbed, topping the $44 per barrel mark after weeks of declines. A barrel of light crude rose $1.84 to settle at $44.61 a barrel on the New York Mercantile Exchange.

Wall Street also was disappointed by the Commerce Department's report on wholesale inventories, which rose 1.3 percent in July, double what economists had expected. Wholesale sales rose by only 0.5 percent — which means that business and consumer spending has trailed off and more products are sitting in warehouses.

"We're starting to see some real evidence of softness in consumer spending," said Russ Koesterich, U.S. equity strategist for State Street Corp. in Boston. "I don't think the economy is falling off a cliff. It's chugging along at a moderate pace, but will it be enough to keep corporate profits where they need to be? That's the question."

Improvements in the nation's job picture could help spur consumers. The Labor Department reported 319,000 new unemployment claims for the past week, down 44,000 from a week ago. It was the lowest level of first-time claims since July.

According to preliminary calculations, the Dow Jones industrial average was down 24.26, or 0.2 percent, at 10,289.10.

Broader stock indicators were markedly higher. The Nasdaq composite index was up 19.01, or 1 percent, at 1,869.65, while the Standard & Poor's 500 index gained 2.11, or 0.2 percent, to 1,118.38.

The economic data likely will weigh heavily on the Federal Reserve as it prepares to meet Sept. 21 to discuss another hike in the nation's benchmark interest rate, which currently stands at 1.5 percent. The improved jobs picture increases the chances that the Fed will raise rates by a quarter percentage point.

While Fed Chairman Alan Greenspan was optimistic about the economy's strength in his congressional testimony yesterday, Wall Street took a more cautious view, waiting to see how the summer's economic slowdown will affect third- and fourth-quarter earnings.

"The takeaway we're getting from the Fed is that the economy's growing, but it's uneven," said Hans Olsen, managing director and chief investment officer at Bingham Legg Advisers. "Add to that the lack of direction in the market, and the next catalyst for the market won't be the Fed meeting or interest rates. It'll be company earnings, and whether there's been enough top-line movement to have an impact on the bottom line."