Updated from 4:06 p.m. EDT

Stocks in the U.S. slid Thursday following two days of gains in New York, as shares in

AIG

(AIG) - Get American International Group, Inc. Report

and

Wal-Mart

(WMT) - Get Walmart Inc. Report

were weak throughout the session.

The

Dow Jones Industrial Average

sank 224.64 points, or 1.9%, to 11,431.43, and the

S&P 500

lost 23.13 points, or 1.8%, to 1266.06. The

Nasdaq

was off 22.64 points, or almost 1%, at 2355.73.

While the market was in the red all day, selling picked up late after Moody's said it has placed the long-term ratings for

American Express

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on review for a possible downgrade. Shares of American Express shed 4.2%.

One of the primary factors weighing on equities from the outset was insurer AIG, who lost $5.36 billion in the second quarter as the continuation of the weak U.S. housing market and disruption in the credit markets dragged down its results. The stock plunged 18%.

Retailers also reported their monthly sales results, and many of them fell short of estimates, including Wal-Mart, the largest chain-store operator in the world.

Wal-Mart's U.S. same-store sales, excluding fuel, were up 3% last month, but that missed expectations. Additionally, the company offered cautious comments for spending in August, and its stock fell more than 6%.

Competitor

Target

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had a steeper-than-expected decline of 1.2% in its July comps, while

Kohl's

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(KSS) - Get Kohl's Corporation (KSS) Report

disappointed analysts with a 10.4% pullback.

However,

Costco

(COST) - Get Costco Wholesale Corporation Report

exceeded forecasts with a 10% increase in same-store sales, and

BJ's Wholesale

(BJ) - Get BJ's Wholesale Club Holdings, Inc. Report

had strong numbers.

Gap

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and

American Eagle

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had comparable-sales decreases that were on the soft side. The S&P Retail Index was down 2.1%.

Citigroup

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was another drag, giving back 6% after agreeing to a more than $7 billion settlement with state and federal authorities regarding probes into the auction-rate securities market.

Initial jobless claims also rattled traders, with the government saying 455,000 first-time filings for unemployment insurance were submitted last week. That was 30,000 more than predicted and up 7,000 from the prior week.

As for earnings,

Toyota's

(TM) - Get Toyota Motor Corp. Sponsored ADR Report

profits dropped roughly 28% owing to sluggish North American sales, while

Sara Lee

(SLE)

topped analysts' quarterly earnings estimates.

Outside the stock market, oil futures added $1.44 to $120.02 a barrel. The dollar improved against major currencies other than the yen.

Turning to the fixed-income side, Treasury prices were much stronger, with the 10-year note up 1-5/32, lowering the yield to 3.92%. The 30-year bond was climbing 2-6/32 to yield 4.55%.

This article was written by a staff member of TheStreet.com.