While many big-name retailers reported solid, if uninspiring, sales for February, the majority of monthly retail sales were below Wall Street's expectations — a disturbing sign for investors who hope consumer spending will remain robust in the face of expected interest rate increases from the Federal Reserve.

"The economy is slowing, not to the point where anybody's really worried, but if corporate profits slow along with it, you're going to want to see the Fed finish up with rate hikes," said Russ Koesterich, senior portfolio manager at Barclays Global Investments in San Francisco. "But the Fed is going to err on the side of inflation. So the one catalyst that could move the markets out of this trading range doesn't seem to be there right now."

The Dow Jones industrial average fell 28.02, or 0.25 percent, to 11,025.51.

Broader stock indicators also fell. The Standard & Poor's 500 index lost 2.10, or 0.16 percent, to 1,289.14, and the Nasdaq composite index dropped 3.53, or 0.15 percent, to 2,311.11.

Bonds fell for a second straight session, with the yield on the 10-year Treasury note rising to 4.64 percent from 4.59 percent late yesterday. The dollar lost ground against other major currencies, while gold prices rose.

Unrest in oil-producing regions as well as higher natural gas prices helped boost crude futures. A barrel of light crude settled at $63.36, up $1.39, on the New York Mercantile Exchange.

The retail worries overshadowed another sign of strength in the labor market. First-time jobless claims rose by 15,000 last week to 294,000, according to the Labor Department. The small increase kept claims below 300,000 for the seventh straight week.

The claims data, however, did not provide any additional clarity on the overall economy. The week's economic data, while plentiful, has been mixed, leaving investors with their uncertainties about economic growth and prompting what Arthur Hogan, chief market analyst at Jefferies & Co., called a knee-jerk reaction to each new bit of data.

"You look at the past three days, we're down, up and down again," said Arthur Hogan, chief market analyst at Jefferies & Co. "Without any real catalyst, and really, without knowing what the Fed will do, we're going to bounce around here for a while."

The Fed meets March 28, and is likely to raise the nation's benchmark interest rate to 4.75 percent. Wall Street will be watching closely for signs whether the March rate hike will be the last in the recent string of increases, or whether the Fed sees more signs of inflation to combat.

Against a backdrop of slowing consumer spending and falling retail sales, more rate hikes could further slow economic growth, which is why investors punished retail sector stocks. Among those reporting retail sales, discount merchants and department stores fared best.

Dow industrial Wal-Mart Stores Inc. narrowly beat Wall Street's expectations with a 3.2 percent increase in sales at stores open at least a year, while rival Target Corp. saw a 3.6 percent jump in same-store sales, also beating analysts' forecasts. Wal-Mart slipped 9 cents to $45.06, while Target fell 86 cents to $53.71.

Costco Wholesale Corp., which reported an 8 percent increase in February sales, said its fourth-quarter earnings slipped 3 percent from a year ago, though the 2004 result included a one-time gain. The bulk retailer nonetheless beat analysts' profit estimates by 2 cents per share. Costco rose 61 cents to $52.80, building on the nearly six-year high reached in the previous session.

Several other retailers disappointed investors. Gap Inc. dropped 38 cents to $18.28 after reporting an 11 percent slide in February same-store sales, while fellow clothing retailer Bebe Stores Inc. slid 35 cents to $17.42 as its sales rose an anemic 1.6 percent for the month, far less than the 4.6 percent Wall Street had forecast.

In other corporate news, Google Inc. rose $11.65, or 3.2 percent, to $376.45 after company executives gave a bullish forecast for its future growth, though they offered no specifics. That was in sharp contrast to earlier in the week, when Google tumbled more than 7 percent Tuesday after the company's chief financial officer said revenue growth was slowing.

Declining issues outnumbered advancers by about 5 to 3 on the New York Stock Exchange, where preliminary consolidated volume came to 2.55 billion shares, compared with 2.33 billion yesterday.

The Russell 2000 index of smaller companies fell 2.19, or 0.3 percent, to 740.16.

Overseas, Japan's Nikkei stock average fell 0.34 percent. In Europe, Britain's FTSE 100 closed down 0.19 percent, France's CAC-40 dropped 0.96 percent for the session, and Germany's DAX index tumbled 1.42 percent.