U.S. stocks declined Thursday, with airline and restaurant shares knocked and the S&P 500 down for a third day, as concern about violence in Iraq increased, along with the price of oil.
"The transports and consumer discretionary names -- restaurants -- are getting banged up today; if people are paying more at the pump they are less likely to go to a restaurant," said Art Hogan, chief market strategist at Wunderlich Securities.
Crude spiked on worry of supply disruptions amid a Sunni militant uprising in Iraq that had rebels controlling two cities and the Wall Street Journal reporting that Iran was sending elite troops to help the Iraqi government fight the rebellion. President Barack Obama said he would not rule out the use of airstrikes to help Iraq's government.
In the transport sector, airlines including United Continental Holdings, Delta Air Lines and JetBlue Airways were slammed, along with the Dow Jones Transportation Average off 2 percent. Olive Garden-operator Darden Restaurants and fast-food chain McDonald's were among the consumer discretionary shares hit.
Domestically, retail sales rose less than expected in May, according to Commerce Department data, which had sales up 0.3 percent last month and the prior month revised higher to 0.5 percent.
Major U.S. Indexes
After a 140-point drop, the Dow Jones Industrial Average lost 109.69 points, or 0.7 percent, to 16,734.19, with Chevron leading blue-chip gainers that extended to six of 30 components.
The declined 13.78 points, or 0.7 percent, to 1,930.11, with energy and utilities the best performing and consumer discretionary and industrials faring the worst among the benchmark's 10 major sectors.
"This looks like an orderly pullback where certain groups have not been touched yet as in the biotechs and semis. If we break down to 1,900 on the S&P, expect the pullback to impact more sectors on the way down," Elliot Spar, market strategist at Stifel Nicolaus, noted in afternoon emailed commentary.
Shares of Lululemon Athletica dropped to a more-than three-year low after the Canadian yogawear retailer reduced its revenue and earnings forecast for the fiscal year and said its CFO would retire early next year.
Twitter shares gained after the micro-blogging service said Ali Rowghani had resigned as chief operating officer, effective Thursday.
The Nasdaq dropped 34.30 points, or 0.8 percent, to 4,297.63.
Decliners outran advancers nearly 3-to-2 on the New York Stock Exchange, where 632 million shares traded. Composite volume exceeded 3 billion.
The CBOE Volatility Index, a measure of investor uncertainty, rose 8.6 percent to a still-historically low 12.60.
Crude futures jumped $2.13 to end at $106.53, its most costly since September; gold futures rose $12.80, or 1 percent, to finish at $1,274.00 an ounce on the New York Mercantile Exchange.
The flight to safety spurred a rally in Treasuries, with the 10-year Treasury yield, used to figure mortgage rates and other consumer loans, falling 5 basis points to 2.591 percent.
Other economic reports Thursday had the number of Americans filing new claims for jobless benefits unexpectedly rising last week, although not enough to alter the view of a labor market that is picking up steam.
And, the Labor Department reported import prices rose 0.1 percent last month after declining 0.5 percent in April.
Also, the Commerce Department reported inventories rose 0.6 percent in April and picked up excluding cars, boosting expectations of increased economic growth in the second quarter.
U.S. stocks declined on Wednesday, with benchmark indexes retreating from all-time highs, after the World Bank lowered its outlook for global growth.
Read MoreStocks slide, worst hit in three weeks for Dow, S&P 500
—By CNBC's Kate Gibson
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Friday: Producer price index, 8:30 a.m. Eastern; consumer sentiment, 9:45 a.m. Eastern.
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