Although Alcoa's better-than-expected profit gave Wall Street confidence about the upcoming earnings season — which kicks into full swing next week — traders were anxious that higher energy and commodities prices would cut into corporate profits and drive up material costs.

Jay Suskind, head trader for Ryan, Beck & Co., said that while energy prices have been steadily climbing over the past few weeks, political turmoil in Iran and Nigeria and forecasts for greater gasoline demand this summer are weighing on the market.

And as other commodities rise along with energy futures, the risk of higher prices being passed to consumers has investors again worried about more interest rates increases from the Federal Reserve, he said.

"(Commodities prices rising) would certainly seep through the economy," Suskind said, "and the Fed is going to hike rates to keep that inflation under control."

Wall Street faced a second day with no new economic reports to guide investors, who are closely monitoring government data for any hint of inflation. Reports on retail sales and consumer confidence are due later this week.

The Dow dropped 51.70, or 0.46 percent, to 11,089.63, its lowest close since finishing at 11,076.02 on March 13.

The broader stock indicators declined. The Standard & Poor's 500 index lost 10.05, or 0.78 percent, to 1,286.57 — also a one-month low — and the Nasdaq composite index fell 22.92, or 0.98 percent, to 2,310.35.

Bonds rebounded from last week's plunge, with the yield on the benchmark 10-year Treasury note slipping to 4.93 percent from 4.96 percent late yesterday. The dollar was mostly lower against most major currencies; gold prices lingered near $600 per ounce.

Crude futures pushed higher as traders awaited news about the controversy over Iran's nuclear arms program and violence in Nigeria. A barrel of light crude gained 24 cents to $68.98 on the New York Mercantile Exchange.

Energy traders also assessed an Energy Department outlook predicting retail gas prices will average about 25 cents more per gallon than last summer, but noting that the increase should not stifle demand. Gasoline futures gained 4.5 cents to $2.054 a gallon on the Nymex.

Aluminum producer Alcoa more than doubled its profit on strong metal prices and robust demand from manufacturers. The company earned 69 cents per share, beating analyst estimates for 51 cents. Alcoa rose $1.26 to $34.09.

Wall Street is awaiting reports from several other major companies this week, with electronics retailer Circuit City Stores Inc. due tomorrow morning and finance and manufacturing conglomerate General Electric Co. on Thursday morning. Circuit City fell 4 cents to $24.61; GE added 13 cents to $34.05.

Bausch & Lomb Inc. sank $8.41 to $49.03 after the eye-care firm halted shipments of a contact lens solution linked to an eye infection that can cause temporary blindness. Analysts are worried the news could hurt sales of its other products.

General Motors Corp. is offloading its 7.9 percent stake in Japanese truckmaker Isuzu for about $300 million of much-needed cash to fund its turnaround plan. GM slipped 18 cents to $19.22.

Swiss banking firm UBS AG said it has agreed to pay $500 million for Piper Jaffray Cos.' U.S. network of private client branches. Piper Jaffray jumped $5.90 to $61.10, and UBS dropped $1.67 to $110.50.

Declining issues led advancers by more than 3 to 1 on the New York Stock Exchange, where preliminary consolidated volume of 2.28 billion shares topped the 1.94 billion shares that changed hands yesterday.

The Russell 2000 index of smaller companies lost 10.84, or 1.44 percent, to 742.11.

Overseas, Japan's Nikkei stock average fell 0.28 percent. Britain's FTSE 100 dropped 0.83 percent, Germany's DAX index tumbled 1.58 percent and France's CAC-40 was lower by 1.5 percent.