A jump in the nation's energy inventories sent stocks falling Thursday as investors worried that demand for oil and gasoline is falling because of the struggling economy.
Major stock indexes slid about 1 percent from 13-month highs, including the Dow Jones industrial average, which fell 94 points after six days of gains. The inventory report from the government pushed crude oil down 3 percent, below $77 a barrel. A gain in the dollar also weighed on prices for commodities including oil by making them more expensive for overseas buyers.
A drop in energy company stocks upended an early advance led by technology shares, which rose after 3Com Corp. agreed to a $2.7 billion takeover by Hewlett-Packard Co. and as Intel Corp. said it would pay $1.25 billion to Advanced Micro Devices Inc. to settle legal disputes.
But stocks could get a boost Friday from The Walt Disney Co., which said after the closing bell that its quarterly profit jumped 18 percent on better results at its movie studio.
The disappointing report on energy usage overshadowed more upbeat news about the economy. The Labor Department said new claims for unemployment insurance fell last week to a seasonally adjusted 502,000 from an upwardly revised 514,000 the previous week. That's the fewest claims since early January and better than economists had forecast.
Wal-Mart Stores Inc. reported third-quarter earnings that beat analysts' expectations, though sales at stores open at least a year dropped during the quarter. The nation's biggest retailer said sales at existing stores would range from a drop of 1 percent to a gain of 1 percent in its fourth quarter. Sales at stores open at least a year are an important indicator of a retailer's strength.
The mammoth company is seen as a key indicator of consumer spending trends. Investors have worried for months that consumers are so strained by unemployment and lower home prices that they won't spend more and help propel a recovery in the economy.
Frank Ingarra Jr., co-portfolio manager at Hennessy Funds in Stamford, Conn., said stocks had been due for a break after steep gains in the past week. The Dow and the S&P 500 index closed at their highest levels since October 2008 on Wednesday.
"There is very light volume so it looks like the market wants to do a little consolidating here," he said.
The Dow fell 93.79, or 0.9 percent, to 10,197.47. It was the biggest drop since Oct. 30 and only the second time this month it fell. The Dow had risen 519 points, or 5.3 percent, in the prior six days _ its longest stretch of gains since late August.
The broader S&P 500 index fell 11.27, or 1 percent, to 1,087.24, after two days of gains. The Nasdaq fell 17.88, or 0.8 percent, to 2,149.02.
The Russell 2000 index of smaller companies fell 12.39, or 2.1 percent, to 580.32.
Four stocks fell for every one that rose on the New York Stock Exchange, where consolidated volume came to 4.2 billion shares compared with 4.3 billion Wednesday.
Tom Nyheim, portfolio manager at Christiana Bank & Trust Co. in Greenville, Del., said the drop in oil wasn't likely to continue because demand would outstrip supply as economies in Asia and elsewhere recover ahead of the U.S.
Nyheim said the market's drop indicated a healthy caution among traders after an eight-month advance that has pushed the S&P 500 index up 60.7 percent. Nyheim predicts that investors satisfied with their gains for the year might avoid placing big bets in November and December to safeguard their returns.
"I think we're going to consolidate, maybe flat-line toward the end of the year," he said.
Treasurys rose, pushing yields lower. The yield on the benchmark 10-year Treasury note fell to 3.45 percent from 3.48 percent late Tuesday. Bond markets were closed Wednesday for Veterans Day.
Crude oil fell $2.34 to settle at $76.94 per barrel on the New York Mercantile Exchange. Gold fell after eight days of gains, settling at $1,106.60.
The drop in oil weighed on energy stocks. Anadarko Petroleum Corp. fell $2.43, or 3.7 percent, to $62.55, while Range Resources Corp. fell $2.22, or 4.3 percent, to $48.98.
Among tech stocks, 3Com rose $1.77, or 31.1 percent, to $7.46, while H-P fell 30 cents, or 0.6 percent, to $49.70.
Advanced Micro rose $1.16, or 21.8 percent, to $6.48, and Intel fell 16 cents, or 0.8 percent, to $19.68.
Wal-Mart rose 27 cents, or 0.5 percent, to $53.24. Kohl's Corp. rose 5 cents, or 0.1 percent, to $54.64 after the department store chain's fiscal third-quarter profit rose 21 percent.
Overseas, Britain's FTSE 100 rose 0.2 percent, Germany's DAX index fell 0.1 percent and France's CAC-40 lost 0.2 percent. Japan's benchmark Nikkei stock average fell 0.7 percent.