Retail stocks kept sputtering Monday as investors worried about the group's health.

The sectorwide setback came as oil prices climbed and Wall Street mulled over last week's raft of disappointing earnings projections.

The S&P Retail Index was down 0.5%, while crude oil futures were up 40 cents to $65.75. Meanwhile, broader market indices were showing thin gains.

The world's largest retailer,

Wal-Mart

(WMT) - Get Report

, was trading flat after it produced one of the market's highest-profile letdowns last week. While the company delivered some upside on second-quarter expectations, it lowered targets for the rest of the year, citing the effects of rising gasoline prices on consumer spending.

In all, 19 retailers have lowered earnings forecasts for the back half of 2005, and the market is struggling with what to expect from the consumer.

"People are wondering what is being taken off the discretionary spending table because of inflation, interest rates, gas prices and the reduction in use of home equity credit," says Richard Hastings, a retail analyst with Bernard Sands. "While the back-to-school season will be just marginally off from last year's results, there are some real questions about what sort of holiday season we're going to get this year."

Specialty retailers were getting hit especially hard Monday after Wedbush Morgan Securities analyst Adrienne Tennant downgraded some top performers in the space, citing bloated inventories for denim items going into a cool back-to-school season.

Tennant lowered her rating on

Abercrombie & Fitch

(ANF) - Get Report

,

American Eagle Outfitters

( AEOS) and

Pacific Sunwear

(PSUN)

. Abercrombie was down 63 cents to $59.35, while American Eagle was off $1.12, or 3.9%, to $27.71, and Pacific Sunwear was losing 16 cents to $22.98.

Talk of a denim overload, which has been widely viewed as the major fashion trend for teen shoppers, was affecting other apparel retailers as well. Shares of

bebe stores

(BEBE)

were recently down 34 cents to $24.28, while shares of

Aeropostale

(ARO)

were off 15 cents to $24.45 and

Guess?

(GES) - Get Report

was down 22 cents to $21.79.

Other big losers in the sector included

Nordstrom

(JWN) - Get Report

, down 33 cents, or 1%, to $33.32.

The Talbots

(TLB)

dropped 37 cents, or 1.2%, to $31.36;

Ann Taylor

(ANN)

lost 27 cents, or 1%, to $26.33; and

Dillard's

(DDS) - Get Report

was down 42 cents, or 1.9%, to $21.67.

"It's possible that the holiday season this year is really up for grabs now," Hastings says. "Things could really swing to the downside if these conditions persist."