The Commerce Department's latest reading on GDP showed the economy growing at an annualized rate of 3.4 percent. While economists had expected GDP growth to come in at 3.5 percent, it was considered a strong showing considering the high energy costs that continue to plague the economy.

"This is good growth, and it's not the type of growth that's going to scare people from an inflation standpoint," said Mark Bronzo, managing director at Gartmore Separate Accounts. "However, from this number, I would think the Federal Reserve will continue to raise interest rates, at least for the next few meetings."

The Fed next meets Aug. 9, and is widely expected to raise the nation's benchmark interest rate by a quarter percentage point to 3.5 percent. The prospect of further rate hikes may also have been a factor in profit-taking by investors fearing a further slowdown in the economy.

The Dow Jones industrial average fell 64.64, or 0.60 percent, to 10,640.91.

Broader stock indicators also fell. The Standard & Poor's 500 index was down 9.54, or 0.77 percent, at 1,234.18, and the Nasdaq composite lost 13.61, or 0.62 percent, to 2,184.83.

A string of bullish economic data and strong corporate earnings combined to make July a strong month on Wall Street. The Dow gained 3.56 percent, while the S&P rose 3.6 percent and the Nasdaq surged 6.22 percent. The Nasdaq, which enjoyed very positive earnings reports from the technology sector, saw its best month since December 2003.

But while profits remained strong this week and the economic data was generally sound, the rally that kept stocks climbing for all of July appeared to be running out of momentum, and investors opted to start cashing in. For the week, the Dow fell 0.1 percent, while the S&P edged 0.04 percent higher and the Nasdaq gained 0.23 percent.

Today's profit-taking extended to the bond market, which rallied yesterday but dropped sharply today. The yield on the 10-year Treasury note climbed to 4.28 percent from 4.19 percent late yesterday. The dollar gained ground against the euro, and gold prices also rose.

Fears about oil's effect on the economy contributed to the negative tone as oil prices again topped $60 per barrel. A barrel of light crude settled at $60.57, up 63 cents, on the New York Mercantile Exchange.

The market's losses were limited, however, as a key barometer of future economic growth showed consumers appear willing to spend despite higher oil and gas prices. The University of Michigan's consumer sentiment index for July came in at 96.5, slightly higher than the June reading and inline with analysts' expectations.

"Yes, you have good economic data, but you're running up against a market that's recently hit some very good highs," said Rod Smyth, chief investment strategist at Wachovia Securities. "July was a great month for stocks. But now traders are starting to think that we're done for now, that the upside-to-downside odds, in the short term, are getting less and less good."

In earnings news, natural gas and oil company Unocal Corp. slipped 35 cents to $64.85 despite reporting strong earnings that beat Wall Street's forecasts by 14 cents per share. The company, which focuses on exploration, is the subject of a bidding war between Chevron Corp. and CNOOC Ltd., China's state-owned energy company.

Unocal stock may have lost momentum after two newspapers reported CNOOC could drop its bid for the company. According to the Financial Times and Hong Kong's South China Morning Post, CNOOC is considering whether to raise its bid for Unocal or drop it entirely due to the intense outcry from politicians worried about Chinese ownership of an American energy company. CNOOC's U.S. depositary receipts rose $4.61 to $69.81.

Chevron lost 93 cents to $58.01 even after its quarterly earnings beat expectations. While profits fell 11 percent, Chevron's profits were 7 cents per share better than analysts' estimates. The strong showing could make Chevron's bid for Unocal more attractive.

Profits at insurance company MetLife Inc. more than doubled in the second quarter due to strong revenues across its business lines. MetLife, which beat Wall Street's profit forecasts by 27 cents per share, rose $1.08 to $49.14.

Fast-food chain Wendy's International Inc. surged 14.2 percent, gaining $6.43 to $51.70 after posting better-than-expected earnings, but lowering its full-year earnings forecast. The company also announced it would spinoff part of its Tim Horton's coffee-and-doughnut franchise into an initial public offering.

Declining issues led advancers by about 3 to 2 on the New York Stock Exchange, where volume came to 1.4 billion shares, compared with 1.56 billion yesterday.

The Russell 2000 index of smaller companies was down 3.29, or 0.48 percent, at 679.75.

Overseas, Japan's Nikkei stock average rose 0.35 percent. In afternoon trading, Britain's FTSE 100 was up 0.23 percent, France's CAC-40 fell 0.24 percent for the session, and Germany's DAX index fell 0.12 percent.