Bears Romp on Wall Street

Stocks close lower as oil climbs and retail returns look weak.
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Updated from 4:11 p.m. EDT

Stocks struggled all day and closed near their session lows Thursday as traders turned defensive amid a torrent of weak chain-store sales and another increase in the price of oil.

The

Dow Jones Industrial Average

I:DJI

lost 87.49 points, or 0.82%, to 10,610.10, while the

S&P 500

(SPX)

was off 9.18 points, or 0.74%, to 1235.86. The

Nasdaq Composite

(NASDAQ)

dropped 25.49 points, or 1.15%, to 2191.32.

About 1.50 billion shares changed hands on the

New York Stock Exchange

, while trading volume on the Nasdaq was 1.61 billion shares. Decliners beat advancers by a 2-to-1 margin.

"Today is the day that people decided gas and oil prices were too high and used it as an excuse to take profits," said Phillip Roth, chief technical market analyst with Miller Tabak. "The market is broadly down, and with the exception of retail, there's no standouts of weakness. At this juncture, I'm not reading more into it than an excuse to take some profits."

Oil prices firmed after shedding $1 a barrel Wednesday on an unexpected increase in U.S. crude inventories. The September contract finished up 52 cents to $61.38 a barrel in Nymex floor trading.

"Oil prices are stubbornly high, with storm after storm coming," said Dave Briggs, head of equity trading with Federated. "We're hopefully due for some type of pullback with inventories slowly building, but we have to wait until we find out if these storms coming off the African coast will be dangerous or benign."

The most immediate threat, Tropical Storm Harvey, was last reported moving out to sea after soaking Bermuda with heavy rain earlier.

In other markets, the 10-year Treasury was down 4/32 in price to yield 4.31%, while the dollar rose against the yen and was little changed against the euro.

The Dow was led lower by 2.3% declines in

Home Depot

(HD) - Get Report

and

Intel

(INTC) - Get Report

, a 2.1% drop in

Alcoa

(AA) - Get Report

, and 1.5% losses in

Procter & Gamble

(PG) - Get Report

and

Verizon

(VZ) - Get Report

.

In the day's only economic report, the Labor Department said initial jobless claims fell by 1,000 to 312,000 for the week ended July 30. Economists expected claims to rise 5,000 last week.

While the report didn't move the market, along with earlier numbers it provided a possible hint of what to expect from the employment number in Friday's nonfarm payrolls data for July. The report is expected to show a 180,000-job increase after June's 146,000-job print.

Ian Shepherdson, chief economist with High Frequency Economics, says that "assuming unadjusted claims continue to follow last year's pattern, the headline number will remain close to 310,000 or so, consistent with payroll growth of about 250,000. That does not guarantee 250,000 tomorrow, but we are hopeful."

U.S. retailers flooded the wires with same-store sales reports Thursday, most of them bad. Research outfit Retail Metrics said comps rose about 3.7% in July from a year ago, about a half-point below forecasts. The gain fell to 3.1% when Wal-Mart is excluded.

Among companies,

Aeropostale

(ARO)

said comps unexpectedly fell in July, leading it to cut second-quarter earnings guidance. Aeropostale fell $2.24, or 7.6%, to $27.11.

The same story was told at

Pier 1

(PIR) - Get Report

, where same-store sales fell 7.7% from a year ago. The company said existing loss estimates for the company's second quarter might be too narrow. The stock was down 50 cents, or 3.5%, $13.68.

Wal-Mart

(WMT) - Get Report

, which said over the weekend that same-store sales rose 4.4% in July, confirmed the number Thursday morning.

Costco

(COST) - Get Report

reported a 5% jump in comps, slightly better than expected. Wal-Mart was falling 36 cents, or 0.7%, to $49.32. Costco closed down 20 cents, or 0.5%, to $44.25.

Starbucks

(SBUX) - Get Report

reported a healthy 7% rise in same-store company-owned sales. Starbucks lost 92 cents, or 1.8%, to $50.98.

Among earnings,

Gillette

(G) - Get Report

posted a second-quarter profit of $498 million, or 49 cents a share, up from $426 million, or 42 cents a share, a year earlier. Sales for the quarter jumped 13% to $2.77 billion. Analysts expected earnings of 46 cents a share on sales of $2.7 billion, according to Thomson First Call. Gillette, which is in the process of being acquired by

Procter & Gamble

(PG) - Get Report

, slid 75 cents, or 1.4%, to $52.20.

Recently public

Warner Music

(WMG) - Get Report

posted a third-quarter loss of $179 million, or $1.41 a share, including $135 million of IPO expenses. The adjusted loss of 27 cents a share was narrower than Wall Street expected. The stock rose $1.06, or 6.7%, to $16.79.

Toll Brothers

(TOL) - Get Report

says third-quarter homebuilding revenue rose 55% from a year ago to $1.54 billion, the highest for any quarter in the company's history. Toll said one-third of its projects now have backlogs of 12 months or more. Shares were off 84 cents, or 1.5%, to close at $54.88.

Telecom services company

Alltel

(AT) - Get Report

said second-quarter earnings rose to $402.1 million, or $1.27 a share, from $262.5 million, or 85 cents a share, a year ago. Excluding items, earnings were 90 cents a share. Revenue rose 11% to $2.26 billion from a year earlier. The Thomson First Call consensus was for EPS of 85 cents on revenue of $2.18 billion. Alltel fell $1.64, or 2.5%, to $63.99.

CheckFree

(CKFR)

earned $11.9 million, or 13 cents a share, in its fiscal fourth quarter, slightly up from $11.4 million, or 12 cents a share, a year ago. Revenue grew to $203 million from $160 million. Excluding items, CheckFree earned $36.5 million, or 39 cents a share, beating analysts' estimates by a penny, according to Thomson First Call. The stock surged 10.6%, closing up $3.85 to $40.25.

After the bell Wednesday,

Electronic Data Systems

(EDS)

said second-quarter earnings fell to $26 million, or 5 cents a share, from $270 million, or 54 cents a share, a year ago. Revenue dipped to $5.2 billion from $5.24 billion last year. Excluding items, EDS earned $45 million, or 9 cents a share, beating expectations for a loss of 3 cents a share on revenue of $5.1 billion. The stock rallied $1.83, or 8.6%, to close at $23.12.

Amylin Pharmaceuticals

(AMLN)

was down more than 6% ahead of the company's second-quarter earnings report, expected after the bell. Amylin is expected to post a loss of 32 cents a share for the quarter, according to Thomson First Call. The stock was lower by $1.42, or 6.6%, to $20.03.

Overseas markets were mostly lower, with London's FTSE 100 down 0.4% to 5313 and Germany's Xetra DAX losing 0.8% to 4882. In Asia, Japan's Nikkei fell 0.8% overnight to 11,883, while Hong Kong's Hang Seng lost 0.1% to 15,112.

To view Gregg Greenberg's video take on today's market, click here

.