Stocks closed lower, hurt by rising oil prices and fresh worries about the financial sector, though the market ended off its lows for the day.
A profit shortfall by manufacturer Deere added to worries about the health of the U.S. economy. Investors also were troubled by the government's retail sales report and a jump in oil prices.
Oil closed at $115.85 a barrel, up $2.84 from Tuesday's close but below the level of $116.50 or so that traders were watching as key to crude's direction.
Shares of Deere plunged after the farm equipment maker said quarterly profit rose 7 percent but fourth quarter results would be hurt by raw materials costs.
Theresults also reflected the widening impact of the U.S. housing slump and and dragged along other big manufacturers, including Caterpillar.
Shares of financial services companies, including banks, also took a beating on fears of more mortgage-related losses.
"People are worried about the impact the credit crunch is going to have on consumers," said Eric Kuby, chief investment officer at NorthStar Investment Management Corp in Chicago. "The retail sales number this morning was another data point suggesting that the economy is weakening and the consumer is pulling back on their purchases."
Retail sales edged down 0.1 percent in Julyon another big drop in auto sales,capping a 21.6 percent decline over the past 12 months that was the largest in the past 26 years, a Labor Department report showed.
The Nasdaq briefly flirted with positive numbers as Apple continued its iPhone sales-fueled rally. Best Buy, meanwhile, was one of the positives for retail as shares got a boost on news that the store will be the first general retailer to sell the phones.
Retailers Beat Down
But automakers were getting crushed by crude oil's comeback, with shares at General Motors and Ford both down sharply.
Earnings news weighed on markets and amplified concerns over the economy as retailers Liz Claiborne and Macy's both posted reports that left Wall Street dissatisfied.
Liz Claiborne saw its shares tumble after the company reported better-than-expected earnings but lowered its full-year outlook. Macy's missed earnings and said same-store sales fell 2.1 percent, pushing shares lower.
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Broader damage, however, was prevented by relative strength in technology as chipmaker Nvidia posted a loss that nevertheless beat analyst estimates.
Merck led a minority of gainers on the Dow.
Wall Street was looking to bounce back the day after the Dow lost more than 1 percent on more bleak news from the financial sector. The move lower thwarted a week-long stocks rally that saw the bluechip index gain more than 4 percent.
"All of this volatility is usually the precursor to a large move," Jack Bouroudjian, a principal at Brewer Investments. "When you have a lot of money on the sidelines and there's a lot of tension and a lot of nervousness out there, that's usually indicative of a bottom."
Housing, Banks Continue to Challenge
Problems in housing also will haunt the market, as data released before the bell indicated a drop in mortgage applications as interest rates surge. Ahead of trading, Toll Brothers said its expects third-quarter homebuilding revenue to drop 34 percentbut shares gained.
The banking industry also faced more trouble, with Capital One shares falling after Fox-Pitt announced it was beginning coverage of the bank with an "underperform" rating and a price target of $34 per share, compared with the company's $43.16 at the close of Tuesday trading.
The sector was broadly lower with Bank of America continuing to take a beating over credit concerns.
In deal news, CVS Caremark shares slid after the pharmacy chain said it was buying Longs Drug Stores for about $2.6 billion. Longs shares soared.
Also in earnings, Dutch financial group ING reported quarterly net profit that beat estimates as investments fell less than expected, and its underlying insurance and banking business remained solid.
Second-quarter net profit fell 25 percent, hurt by lower real estate, private equity valuations and investment returns, to 1.92 billion euros ($2.86 billion).