"The economic data was okay, but I am surprised by Target's numbers," said Warren Simpson, who helps manage $2.6 billion at Stephens Capital Management in Little Rock, Arkansas. Retailers dropped after the company, the second-largest U.S. discount chain, said sales this month will be lower than planned.

Johnson & Johnson rallied, limiting the loss in the Dow Jones Industrial Average, after salvaging its takeover of heart-device maker Guidant Corp. with an agreement cutting the price by $4 billion.

The Standard & Poor's 500 Index declined 4.75, or 0.4 percent, to 1229.01 for its steepest loss since Oct. 27. The Nasdaq Composite Index fell 14.21, or 0.7 percent, to 2186.74. The Dow Jones Industrial Average slipped 10.73, or 0.1 percent, to 10,686.44.

Stock indexes failed to resume a three-week rally that stalled yesterday. The S&P 500 had climbed 4.7 percent through Nov. 11 as better-than-expected earnings and lower oil prices eased concern that fuel costs would spur inflation and crimp consumer spending and profit growth.

Five stocks fell for every two that rose on the New York Stock Exchange. About 1.69 billion shares changed hands on the Big Board, 4.7 percent more than the three-month average.

Target

Target slid $4.13, or 7.1 percent, to $54.30 for the second-biggest drop in the S&P 500. The company said sales growth at stores open at least a year in November may be below its forecast of 4 percent to 6 percent. Target declined to provide further details.

"Target has been a great performer and a mainstay" among retailers, said Todd Leone, head of listed trading at SG Cowen Securities Corp. in New York. "That scares people."

A gauge of retailers fell 2.3 percent for the biggest loss among two dozen S&P 500 industry groups. Best Buy Co., the top U.S. electronics retailer, retreated $2.61 to $43.89.

Staples Inc., the world's largest office-supply retailer, lost $1.06 to $22.80. The company reported third-quarter profit of 32 cents a share, matching the average analyst estimate and breaking a string of four straight quarters where results exceeded predictions. Staples also said profit in the current period will meet estimates.

Same-store sales at U.S. retailers fell by 0.6 percent in the week ended Nov. 12 from the previous week, as warm weather trimmed demand for seasonal goods, the International Council of Shopping Centers said. The New York-based trade group tracks results at about 75 chains.

Economic reports

Reports on retail sales, manufacturing and producer prices showed the economy expanded while inflation was kept at bay.

Retail sales declined 0.1 percent in October, a Commerce Department report showed. Excluding autos, sales rose 0.9 percent, more than the 0.3 percent expected by economists in a Bloomberg News survey.

Prices paid to factories, farmers and other producers rose 0.7 percent last month, topping economists' expectations. Excluding energy and food, so-called core prices dropped 0.3 percent for the biggest decrease in more than two years. Economists expected a gain of 0.2 percent in the core measure.

Manufacturing in New York state is expanding at a faster pace this month. The Federal Reserve Bank of New York's general business conditions index rose to 22.8 from 12.1 in October. A number above zero suggests expansion.

Oil prices fell to levels not seen in almost four months on speculation that U.S. stockpiles rose last week. Crude oil for December delivery declined 1.2 percent, to $56.98 a barrel, the lowest close since July 20.

Bernanke

Comments from Ben S. Bernanke, nominated to replace Alan Greenspan as Federal Reserve Chairman, suggested that he won't let inflation accelerate. Bernanke said that long-run price stability is essential, according to a text of his remarks at his confirmation hearing before the Senate Banking Committee.

"Stability is the key phrase," said David Briggs, head of global equity trading at Federated Investors Inc., which handles $25 billion in Pittsburgh. Investors "feel like he is going to come in and not roil the markets."