Updated from 4:07 p.m. EDT

Stocks flirted with 2005 lows for the second session in a row Wednesday as sinking oil prices couldn't offset earnings warnings from disparate sectors and weak retail sales.

The

Dow Jones Industrial Average

closed down 104.04 points, or 0.99%, to 10,403.93, the

S&P 500

shed 13.97 points, or 1.18%, at 1173.79, while the

Nasdaq

fell 31.03 points, or 1.55%, to 1974.37, just above its six-month low of 1973.88 touched on March 29. The Nasdaq suffered its worst single-session point loss since Feb. 9, while the S&P's decline was the worst in seven weeks.

Trading volume on the

New York Stock Exchange

was 2.03 billion shares, with decliners beating advancers by almost a 3-to-1 margin. Volume on the Nasdaq was 1.71 billion shares, with decliners beating advancers by about 3 to 1 as well.

In other markets, the 10-year Treasury note, which jumped a half-point in price Tuesday on dovish

Federal Open Market Committee

minutes, was down 2/32 Wednesday to yield 4.36%, while the dollar fell against the yen and euro.

"The market is concerned about economic growth, and not earnings, when dealing with a Fed potentially raising rates," said Peter Boockvar, equity strategist with Miller Tabak & Co. "There's definitely anxiety ahead of earnings, but it will only give us an idea of just this first quarter. The market is looking much further down the line."

Oil continued to ease, with the May contract closing $1.64 lower at $50.22 in Nymex floor trading. Oil spiked lower after a government report on inventories showed that crude supplies rose 3.6 million barrels in the previous week. The Department of Energy report also showed that gasoline stocks increased by 800,000 barrels last week. The May contract has gained ground in only one of the past seven sessions, losing about 12% of its value.

"One would've expected the market to rally, after oil has dropped more than $8 a barrel," said Barry Hyman, an equity market strategist with Ehrenkrantz King Nussbaum. "You're seeing winning sectors in energy and materials being sold off with no real rotation or movement."

Stronger sectors Wednesday included drugs and health care. Weaker ones included semiconductors, biotech, retail and materials.

The Philadelphia semiconductor sector index fell 2.7% Wednesday, led lower by a 6% decline in

KLA-Tencor

(KLAC) - Get Report

and a 5% decline in

Novellus

(NVLS)

.

On the economic front, the Commerce Department said March retail sales increased 0.3%, much less than the expected 0.8% increase. The previous month's 0.4% gain, however, was revised higher to 0.6%. Excluding autos, retail sales were up 0.1%. Economists had projected a 0.5% increase.

U.S. markets turned on a dime and rallied Tuesday afternoon after the release of FOMC minutes that portrayed Federal Reserve policymakers as unexpectedly optimistic on the economy. While several members noted rising price pressures, the tone was less hawkish than many stock and bond traders had feared.

In corporate news, two of the top investment bankers at

Morgan Stanley

(MWD)

resigned Wednesday. Joseph Perella and Terry Meguid resigned Wednesday, just two weeks after Chief Executive Phil Purcell replaced three top executives, starting a battle with a group of the company's shareholders who say they plan to oust Purcell from his post. Shares of Morgan Stanley were down $1.35, or 2.5%, to $53.13.

Harley-Davidson

(HDI)

tumbled Wednesday after the company lowered its 2005 earnings outlook. The company also reported first-quarter earnings of $227.2 million, or 77 cents a share, up from $204.6 million, or 68 cents a share, a year ago. Revenue rose 6% to $1.24 billion. It now expects 2005 earnings growth between 5% and 8%, lower than its previous projection of growth in the midteens. Harley-Davidson fell $9.84, or 16.7%, to $48.93.

A slew of profit warnings shook the calm after the bell Tuesday, including preannouncements from software maker

Compuware

(CPWR)

, hardware provider

Foundry Networks

(FDRY)

and container giant

Smurfit-Stone

(SSCC)

. Merrill Lynch on Wednesday cut Foundry Networks to neutral from buy on the first-quarter earnings warning, sending the stock down 45 cents, or 4.7%, to close at $9.00.

McDonald's

(MCD) - Get Report

said it now expects first-quarter earnings of 56 cents a share, which includes a 13-cent-a-share gain from a lower tax rate and a charge of 3 cents a share related to share-based compensation. Analysts currently expect first-quarter EPS of 43 cents, according to Thomson First Call. Shares rose 32 cents, or 1%, to $31.22.

Several medical stocks also were battered when an FDA panel rejected

Inamed's

(IMDC)

application to bring silicone-gel breast implants back to the cosmetic surgery market. Inamed fell 4.4% Wednesday, while

Medicis

(MRX)

and

Mentor

(MENT)

dropped 3.1% in sympathy.

Biotech

ImClone Systems

(IMCL)

fell after saying late Tuesday that it would need to push back its timeline in order to seek approval for its colon cancer drug Erbitux to treat both head and neck cancer. Brokerage Fulcrum Global cut ImClone to neutral on the news. Shares plummeted $4.13, or 11.7%, to finish at $31.18.

Elan

(ELN)

and partner

Biogen Idec

(BIIB) - Get Report

said results from a two-year trial of their drug Tysabri showed a significant reduction in disability progression in multiple sclerosis patients. The companies pulled Tysabri from the market in late February after being linked to a sometimes deadly nervous system disease. Biogen Idec lost 25 cents, or 0.7%, to $36.45, while Elan jumped 52 cents, or 13.8%, to $4.29.

In brokerage action, Prudential Equity Group upgraded

Wal-Mart

(WMT) - Get Report

to neutral weight from underweight, citing valuation. Despite the upgrade, the stock closed down 6 cents, or 0.1%, to $48.57.

Apple Computer

(AAPL) - Get Report

and

Advanced Micro Devices

(AMD) - Get Report

will report earnings after the market closes Wednesday. Apple is expected to earn 24 cents a share for the quarter, more than tripling last year's number, on $3.15 billion in sales.

Thursday will see earnings reported from such companies as

PepsiCo

(PEP) - Get Report

,

Sun Microsystems

(SUNW) - Get Report

,

Southwest Airlines

(LUV) - Get Report

and

The New York Times

(NYT) - Get Report

.

Overseas stocks were mostly higher, with London's FTSE 100 finishing up 0.3% to 4960 and Germany's Xetra DAX adding 0.7% to 4405. In Asia, Japan's Nikkei fell 0.3% overnight to 11,638, while Hong Kong's Hang Seng gained 1% to 13,800.