Crude oil futures slid from their record highs earlier this week as it became clearer that Hurricane Katrina was unlikely to disrupt U.S. refineries in the Gulf of Mexico. A barrel of light crude settled at $66.13, down $1.36, on the New York Mercantile Exchange.

Yet there may be little reason for oil prices to drop substantially lower in the near term, and one analyst said the market could be headed still lower as a result.

"Right now, for the short term, the market is probably going to continue on this path for a little bit," said Arthur Hogan, chief market analyst at Jefferies & Co. "Unless we get some dissipation of headwinds facing the market, we have a tough running ahead."

The Dow Jones industrial average declined 53.34, or 0.51 percent, to 10,397.29, the index's lowest close in more than seven weeks.

The broader stock indicators also headed lower. The Standard & Poor's 500 index fell 7.29, or 0.6 percent, to 1,205.10, and the Nasdaq composite index dropped 13.60, or 0.64 percent, to 2,120.77.

Bonds finished lower, with the yield on the 10-year Treasury note rising to 4.19 percent from 4.16 percent yesterday. The U.S. dollar was mixed against other major currencies in European trading, while gold prices edged higher.

Wall Street was rattled at the start of today's session after the University of Michigan reported August's consumer sentiment index at 89.1, down from a July reading of 96.5 and well below economists' expectations of 92.5.

Some analysts said the drop in consumer confidence was not unexpected, with higher gas prices eating into shoppers' disposable income. Although the market held fast as energy prices climbed earlier this summer, the growing impact has weighed on the market in recent weeks amid light summer trading volume.

For the week, the Dow lost 1.53 percent, the S&P fell 0.69 percent and the Nasdaq dropped 1.2 percent.

Investors also mulled cautionary comments from Federal Reserve Chairman Alan Greenspan, who warned that stalled trade negotiations and bloated budget deficits could threaten the United States' long-term vitality. The Fed chief also gave a grim outlook for the economy as it nears the end of a period of sustained low interest rates, saying that while rising stock and home prices have driven spending in recent years, the perceived wealth could evaporate in the face of a rapid economic downturn.

"I guess today's one-liner that put a spook in the market had to do with stock and real-estate valuation," Hogan said. Hogan added that while Greenspan's statement was not too alarming, he thinks it "definitely ... had a negative impact on the market."

In corporate news, Merck & Co. helped drag the Dow lower, with shares closing down 11 cents at $27.66 after the drug maker said it may settle part of the Vioxx litigation after the first case drummed up a jury award of more than $250 million. Merck, which previously said it would fight each case over Vioxx's harmful side effects, added that it does not plan on a global settlement.

Investors also were shaken following a pair of downgrades on Petco Animal Supplies Inc. Late yesterday, Petco blamed rising gas prices that have cut into consumer spending for a 7 percent drop in second-quarter income. Analysts at Piper Jaffray and JPMorgan then reduced Petco to neutral ratings, citing the company's lowered outlook. Petco dropped $3.56, or 13.9 percent, to $21.99.

Elsewhere, Pixar Animation Studios saw its shares tumble after a newspaper reported the Securities and Exchange Commission opened an informal inquiry into the movie studio, which has said higher-than-expected DVD returns caused it to miss second-quarter forecasts. Pixar fell $1.01 to $41.99.

Hewlett-Packard Co. announced plans to repurchase an additional $4 billion of its stock. The company has bought back $2.1 billion of shares during the first three quarters of its fiscal year. HP shares rose 11 cents to $27.01.

Declining issues outpaced advancers by more than 11 to 5 on the New York Stock Exchange, where preliminary consolidated volume of 1.54 billion shares was down from 1.58 billion shares traded yesterday.

The Russell 2000 index of smaller companies fell 9.06, or 1.38 percent, to 648.64, and dropped into negative territory for the year.

Overseas, Japan's Nikkei stock average rose 0.28 percent. Britain's FTSE 100 fell 0.53 percent, Germany's DAX index lost 1.49 percent, and France's CAC-40 was 0.82 percent lower.

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The Dow Jones industrials ended the week down 161.94, or 1.53 percent, finishing at 10,397.29. The S&P 500 index fell 14.61, or 1.2 percent, to close at 1,205.10.

The Nasdaq dropped 14.79, or 0.69 percent, during the week, closing today at 2,120.77.

The Russell 2000 index closed the week down 3.87, or 0.59 percent, at 648.64.

The Dow Jones Wilshire 5000 Composite Index — a free-float weighted index that measures 5,000 U.S. based companies — ended the week at 12,042.41, down 125.5 points from last week.