Many of the nation's retailers reported only modest sales gains as hot weather stifled demand for fall fashions and as many consumers spent their money at auto dealers instead of malls. But investors nonetheless were wondering whether retailers' results were a sign that consumers might finally be feeling the pinch from high gasoline and energy prices.

Those concerns were exacerbated by another rise in crude oil futures, which once again neared all-time highs. A barrel of light crude settled at $61.38, up 52 cents on the New York Mercantile Exchange.

However, with stocks still near four-year highs, analysts said the selloff was unlikely the start of a major downward trend.

"I think you're seeing some movement on the retail sales and oil, but I don't think it's meaningful," said Kurt Wolfgruber, chief investment officer at Oppenheimer Funds. "I still think this market will grudgingly go up."

The Dow Jones industrial average fell 87.49, or 0.82 percent, to 10,610.10.

Broader stock indicators also lost ground. The Standard & Poor's 500 index dropped 9.18, or 0.74 percent, to 1,235.86, and the Nasdaq composite index lost 25.49, or 1.15 percent, to 2,191.32.

Bonds traded in a narrow range, with the yield on the 10-year Treasury note rising to 4.31 percent from 4.30 percent late yesterday. The dollar was mixed against other major currencies, while gold prices rose.

The sales reports and oil worries overshadowed a positive employment report from the Labor Department. First-time jobless claims fell by 1,000 last week to 312,000. The news bodes well for tomorrow's monthly job creation report. Economists expect the economy to have created 186,000 jobs in July.

While the latest retail sales reports weren't alarming — especially since they followed a robust June — there were enough companies reporting disappointing sales to keep investors on edge. Among those retailers whose sales fell below analysts' estimates, Aeropostale Inc. tumbled $2.24 to $27.11, Limited Brands Inc. fell 68 cents to $24.35 and Pier 1 Imports Inc. was down 50 cents at $13.68.

But Wal-Mart Stores Inc. had better news, saying it expects its same-store sales to rise between 3 percent and 5 percent in August, the critical back-to-school shopping season. It also confirmed a 4.4 percent rise in sales for June. Wal-Mart nonetheless skidded 39 cents to $49.29.

"Retail sales set the tone for the day, but we've had very little news otherwise," said Brian Williamson, an equity trader at The Boston Company Asset Management. "We've come off of the recent highs and that probably triggered some selling. Volume isn't huge, though, so you can't say there's a lot of conviction behind this. Probably some profit-taking, some consolidation, and that's it."

In earnings news, Gillette Co. dropped 75 cents to $52.20 after posting a 17 percent rise in second-quarter profits due to brisk sales of new products and cost cutting. Procter & Gamble Co., which is acquiring Gillette, fell 83 cents to $54.17.

Insurance company Prudential Financial Inc.'s earnings exceeded Wall Street's forecasts by 5 cents per share, powered by stronger sales across its various divisions. However, investors were disappointed by the company's full-year earnings forecasts, and Prudential slid $1.42 to $66.43.

Credit card issuer Metris Cos. Inc. lost 38 cents to $14.46 after it agreed to be purchased by banker HSBC Holdings PLC for $1.59 billion, or $15 per share excluding preferred shares. HSBC dropped 63 cents to $81.90 after announcing the move, the latest pairing of a major bank and a credit card issuer. The two independent card issuers remaining made gains, with Capital One Financial Corp. climbing 81 cents to $83.95 and American Express Co. gaining 37 cents to $55.85.

Exxon Mobil Corp. dropped 48 cents to $58.52 after the company said Chairman and Chief Executive Lee R. Raymond will retire at the end of this year. President Rex W. Tillerson is expected to be named Raymond's successor in both posts.

Declining issues outnumbered advancers by more than 2 to 1 on the New York Stock Exchange, where preliminary consolidated volume came to 1.96 billion shares, compared with 2.01 billion yesterday.

The Russell 2000 index of smaller companies fell 11.54, or 1.69 percent, to 671.84.

Overseas, Japan's Nikkei stock average fell 0.82 percent. In Europe, Britain's FTSE 100 closed down 0.32 percent, France's CAC-40 dropped 0.81 percent for the session, and Germany's DAX index lost 1 percent.