US stocks ended lower on Wednesday after a nearly $2 a barrel surge in the price of oil raised concerns that higher energy costs would eat into consumer budgets and corporate profits, hurting retailers and indurial shares such as Caterpillar Inc
Tech stocks also extended losses, with two unfavourable reports on Chinese Web search engine Baidu.com Inc weighing on shares of other Internet companies. Baidu plunged more than 28 percent.
"We had the Nasdaq acting poorly all day, even when the Dow and the S&P were doing well all day," said Elliot Spar, market strategist with Ryan Beck & Co "But breadth has gotten increasingly negative. We are just seeing technical action here and higher oil is just exacerbating the move."
Spar said investors were also nervous ahead of Thursday's data on consumer prices.
The Dow Jones industrial average fell 52.54 points, or 0.50 percent, to 10,544.90. The Standard & Poor's 500 Index was down 4.04 points, or 0.33 percent, at 1,227.16. The technology-laced Nasdaq Composite Index was down 22.42 points, or 1.03 percent, at 2,149.33.
The Consumer Price Index data will probably influence the Federal Reserve's interest rate decision, due on Tuesday. Market analysts widely expect a quarter of a point rate increase but are looking for word from the central bank on the economic effects of the hurricane.
Earlier, the US Commerce Department reported that retail sales in August dropped a larger-than-expected 2.1 percent, the sharpest decline in almost four years.
Home improvement chain Lowes Companies ended 2.2 percent lower at $65.99 and discount chain Target Corp lost 2.7 percent to $52.75.
"Retailers are still taking a hit off of Best Buy's loss yesterday and now today's data is providing some more selling pressure in the sector," said Tim Heekin.
Best Buy Co Inc reported earnings that fell short of Wall Street expectations on Tuesday, pushing its shares down their lowest level in almost three years. Best Buy's shares closed 7 cents higher at $44.86 on Wednesday.
US light crude oil futures settled $1.98 higher at $65.09 a barrel after the government reported a larger-than-expected drop in crude oil inventories two weeks after Hurricane Katrina disrupted oil production and refining in the Gulf of Mexico.
Industrial blue chip Caterpillar ended 1.9 percent lower at $58.30, while United Technology Corp, also a Dow component slipped 1.1 percent to $50.96.
Baidu.com tanked after Goldman Sachs Group Inc and Piper Jaffray Cos, the underwriters of its August initial public offering, said the stock was overvalued. Baidu fell 28.41 percent to $81.32 making it the top percentage loser on the Nasdaq. Other Nasdaq-listed Internet shares also declined with Yahoo! Inc slipping 1.5 percent to $33.80 and Google Inc falling 2.8 percent to $303.
Delta Air Lines Inc, expected to file for bankruptcy later on Wednesday, slipped 9 percent to 71 cents. In the past year the stock has traded as high as $8.16.
Northwest Airlines Corp, which is also mulling bankruptcy protection, fell 19.1 percent to $1.87 on Nasdaq. Its shares hit $11.83 back in December.
Aerospace company Boeing Co fell after its chief financial officer told an investor conference that plane deliveries would be delayed by its two-week old machinists' strike.
Shares of Boeing edged down 1.9 percent to $64.l8.
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