Adding to investor unease were mixed reports from retailers on October sales, including Wal-Mart Stores Inc., which had disappointing results last month and warned that November sales would also come in below expectations.

The economic reports, which showed wage pressure was increasing at the fastest rate in more than 20 years, rattled investors who have sent the Dow Jones industrial average to a four-day losing streak amid concerns that the economy might be slowing too quickly. Wall Street wants a gradual slowdown so the Fed will cut interest rates.

T.J. Marta, economic strategist at RBC Capital Markets, sees the rising labor costs for the third quarter and an upward revision for the second quarter as unnerving to many investors but said the Fed is looking for such a slowdown. "The Fed is trying to engineer a slowdown so this is all good. The plane is coming in for a landing."

In late afternoon trading, the Dow, which earlier fell below the 12,000 benchmark, was down 29.45, or 0.24 percent, at 12,001.57.

Broader stock indicators were modestly lower. The Standard & Poor's 500 index was down 2.50, or 0.18 percent, at 1,365.31, and the Nasdaq composite index was down 2.51, or 0.11 percent, at 2,331.84.

Bonds fell, with the yield on the benchmark 10-year Treasury note rising to 4.60 percent from 4.57 percent. The dollar was mixed against other major currencies, while gold prices rose.

Light, sweet crude was down 83 cents at $57.88 a barrel on the New York Mercantile Exchange. Oil prices, whose decline had given a boost to stocks during their three-month rally, extended their decline in recent days but largely failed to prop up investor sentiment in the face of economic news. Doubts remain about whether OPEC will push through production cuts, pushing down the price of oil.

Meanwhile, the Labor Department said the number of newly laid off workers seeking unemployment benefits rose last week to its highest level in more than three months.

Investors appeared unfazed by a Commerce Department report that showed factory orders rose a lower-than-expected 2.1 percent in September.

Similarly, the markets showed little reaction to comments by Dallas Federal Reserve President Richard Fisher who said in prepared remarks that while overall inflation remains high it is possible that inflation has peaked and is "finally heading lower." Fisher is a nonvoting member of the Fed's Open Market Committee, which sets short-term interest rates, and was scheduled to give the speech in New York.

Marta contends the productivity figure is typical with what would be seen late in an economic growth cycle, when employers had as many workers as needed. The Fed has said it remains concerned about inflation and that it wants to see a further slowing. He sees investors as split into two camps: those who see a soft landing occurring and those who believe the economy will fall into recession. While he expects a gradual slowdown, he believes investors will at times become agitated when they receive signs of slowing, even those they had been anticipating.

Among retailers, Wal-Mart fell 66 cents to $48.19 after reporting that it expects same-store sales, or sales at stores open at least a year, will be flat in November.

Wal-Mart's disappointing news raised questions about whether the experiences of the world's largest retailer indicated trouble ahead. With the holiday season approaching, Wall Street is hoping robust consumer spending will serve as a counterpoint to weak economic readings — from gross domestic product to consumer spending — that have been seen in recent days. However, investors had bet that gas prices, which were sharply from their year highs in July, would leave consumers eager to spend the extra money in their wallets. October sales results didn't seem to bear that out, particularly for discounters.

Sharper Image Corp. fell $1.27, or 11.5 percent, to $9.76 after issuing a disappointing sales report, while specialty retailer Limited Brands Inc. rose 82 cents, or 2.9 percent, to $29.63 after posting stronger-than-expected results for October.

Hot Topic Inc. was up 67 cents, or 6.8 percent, at $10.49 after the teen clothing retailer posted a wider-than-expected decline in same-store sales but predicted its fourth-quarter profit would likely be above what Wall Street had been expecting.

In other corporate news, Nomura Holdings Inc. agreed to acquire Instinet, the electronic stock broker, from private-equity firm Silver Lake Partners. Nomura, Japan's biggest brokerage, fell 7 cents to $17.31.

Clark Inc., a compensation and benefits consultancy, jumped $3.93, or 31.4 percent, to $16.43 after agreeing to be acquired by a subsidiary of Aegon N.V. for $293 million in a tender offer.

Declining issues outnumbered advancers by about 3 to 2 on the New York Stock Exchange, where volume came to 1.32 billion shares compared with 1.35 billion traded at the same point yesterday.

The Russell 2000 index of smaller companies was down 2.28, or 0.30 percent, at 749.87.