The Dow industrials six-day winning streak came to a halt on Thursday as a drop in oil prices pulled energy stocks lower and a guarded outlook from Wal-Mart fanned worries about consumer spending.
Stocks were also undermined by a U.S. dollar rally, as its safe-haven appeal rose after several policymakers around the world warned the economic recovery was fragile.
With earnings season coming to a close, and looking beyond the Federal Reserve's meeting last week, investors searched for new catalysts to determine the market's direction.
As the S&P 500 has gone above 1,100, it has had a hard time holding on to gains, said Quincy Krosby, market strategist at Prudential Financial in Shelton, Connecticut.
Both the Dow industrials and the S&P 500 hit 13-month closing highs on Wednesday.
Oil futures settled down 3 percent below $77 per barrel as data confirmed crude and refined product inventories rose last week. The S&P energy sector index fell 2 percent, with shares of Hess Corp
The Dow Jones industrial average <.DJI> fell 93.79 points, or 0.91 percent, to 10,197.47. The Standard & Poor's 500 Index <.SPX> dropped 11.27 points, or 1.03 percent, to 1,087.24. The Nasdaq Composite Index <.IXIC> lost 17.88 points, or 0.83 percent, to 2,149.02.
In order to get to the next level up, (the market) does need a strong catalyst, and most of the time the stronger dollar has been a negative, Krosby said.
Shares of insurers and banks were among top laggards, with the S&P financial sector index <.GSPF> down 1.8 percent.
Wal-Mart, the world's largest retailer, reported a higher quarterly profit and its shares rose 0.5 percent to $53.24, but it forecast earnings for the key holiday quarter that could miss Wall Street's consensus estimate.
Concern about consumer spending weighed on the S&P retail index <.RLX>, which fell 0.8 percent.
After the market's close, shares of Walt Disney Co
Advance Micro Systems Inc
Network equipment maker 3Com Corp
Volume was light on the New York Stock Exchange with 1.05 billion shares changing hands, below last year's estimated daily average of 1.49 billion. On the Nasdaq, about 2.24 billion shares traded, slightly below last year's daily average of 2.28 billion.
Declining stocks outnumbered advancing ones on the NYSE by a ratio of about 4 to 1, while on the Nasdaq nearly 10 stocks fell for every three that rose.
(Editing by Kenneth Barry)