Stocks fell on Tuesday after an unexpected drop in retail sales dampened recent optimism over the state of the U.S. economy.

Sales at U.S. retailers fell 1.1 percent in March, snapping two months of increases and hitting a wide range of stocks such as Macy's Inc , which slumped nearly 8 percent, and energy companies like Exxon Mobil Corp , down nearly 2 percent.

We are still struggling to make serious headway with the economy, said Paul Nolte, director of investments at Hinsdale Associates in Hinsdale, Illinois. Its going to put people a little bit more on (the) defensive.

Goldman Sachs posted a much higher-than-expected first-quarter profit boosting bank stocks, but said it planned a $5 billion common share sale to help pay back government funds, sending its shares down more than 5 percent.

Healthcare group Johnson & Johnson reported first quarter earnings of $1.26 per share compared with a Reuters estimate of $1.22, and said it sees 2009 pre-tax margins improving. The company's shares rose 1.8 percent to $52.09.

The Dow Jones industrial average <.DJI> dropped 47.63 points, or 0.59 percent, to 8,010.18. The Standard & Poor's 500 Index <.SPX> fell 3.77 points, or 0.44 percent, to 854.96. The Nasdaq Composite Index <.IXIC> lost 5.17 points, or 0.31 percent, to 1,648.14.

U.S. stock markets have enjoyed a five-week rally spurred by optimism on the economy and the financial sector, which lifted the S&P 500 26 percent from a bear market closing low on March 9. The S&P remains down around 8 percent on the start of the year.

Wal-Mart shares fell 1.1 percent to $50.95 after the retail sales data, which indicated subdued consumer spending amid rising unemployment. Macy's fell 7.9 percent to $11.90, while the S&P Retail Index <.RLX> lost 2.5 percent.

Citigroup shares traded up 15.5 percent to $4.39 in, while Bank of America rose 2.8 percent to $11.30. Goldman Sachs fell 5.3 percent to $123.24. Its equity issue is priced at $123 per share.

Chipmaker Intel is set to kick off tech earnings season after the market closes, with results eyed closely for guidance on the semiconductor market.Intel shares were up more than 1 percent at $16.17.

(Reporting by Edward Krudy; Editing by Theodore d'Afflisio)