Concerns that higher oil prices, which topped $55 per barrel, would accelerate inflation and lead to rising interest rates eroded investor confidence, and the Pentagon's announcement about an anthrax discovery in its mailroom added to the general unease. The tech sector was hit particularly hard after a Merrill Lynch analyst said growth in chip stocks would be stalled for much of the year.

That made it difficult for Wall Street to rise on good news from the retail sector. While the 0.5 percent growth in February retail sales fell slightly below Wall Street expectations, the Commerce Department revised its January figure upward, and auto sales were surprisingly strong in both months. Record earnings from Lehman Brothers Holdings Inc. were likewise discounted by midday, when stocks turned firmly negative.

"There's not enough positive news to get investors to commit to new positions at this point," said Michael Sheldon, chief market strategist at Spencer Clarke LLC. "There's a malaise hanging over the market right now without much of a catalyst to move higher."

According to preliminary calculations, the Dow Jones industrial average fell 59.41, or 0.6 percent, to 10,745.10.

Broader stock indicators also lost ground. The Standard & Poor's 500 index was down 9.08, or 0.8 percent, at 1,197.75, and the Nasdaq composite index, hurt by the Merrill Lynch report, lost 16.06, or 0.8 percent, to 2,034.98.

All three major indexes finished at or near their lows for the session.

Oil prices rose as investors worried that OPEC may not follow Saudi Arabia's lead and increase oil production. A barrel of light crude settled at $55.05, up 10 cents, on the New York Mercantile Exchange.

The bond market slipped lower, with the yield on the 10-year Treasury note rising to 4.54 percent from 4.51 percent late yesterday. Gold prices fell slightly, while the dollar rose against the euro and was mixed against other major currencies.

Wall Street paid close attention to Federal Reserve Chairman Alan Greenspan's testimony on Capitol Hill, hoping to hear his latest views on inflation and interest rates. Greenspan, whose topic today was Social Security, warned that federal budget deficits, not inflation, remained the greatest threat to the economy.

Lehman Brothers' earnings benefited from strong investment banking revenues and advisory fees from the recent wave of merger activity. The brokerage beat Wall Street estimates by 71 cents per share. Lehman gained $2.87 to $96.19.

The Philadelphia Semiconductor Index was off 2.12 percent in response to the Merrill Lynch report on chip stocks, while Dow component Intel Corp. fell 39 cents to $23.88 and Advanced Micro Devices Inc. lost 37 cents to $16.07.

"The Nasdaq didn't even see much of the upside we had earlier in the day because of the semis," said Bill Groenveld, head trader for vFinance Investments. "There's just so much stuff out there that nobody can make heads or tails of, you're just going to go lower out of inertia."

Drug maker Genentech Inc. slid 75 cents to $54.25 after having been strongly higher most of the session. The company announced that studies showed its colon cancer drug Avastin was effective in treating lung cancer patients as well. The news led to two brokerage upgrades of Genentech's stock.

American International Group Inc.'s longtime chief executive, Hank Greenberg, officially stepped down late yesterday, remaining as non-executive chairman. The Dow component also announced a major reshuffling of the executive ranks, to be headed by new CEO Martin Sullivan. AIG lost $1.93 to $61.92.

TiVo Inc. soared $2.87, or 74.9 percent, to $6.70 after the maker of television recorders agreed to a deal with Comcast Corp., the cable operator, that would make TiVo technology available to Comcast customers. Comcast was down 8 cents at $33.91.

Declining issues outnumbered advancers by more than 9 to 5 on the New York Stock Exchange, where volume was moderate to heavy.

The Russell 2000 index of smaller companies was down 3.48, or 0.6 percent, at 626.82.