Stocks ended lower Thursday as the second straight day of falling oil prices spurred a sell-off in energy shares, spooking investors who were already on the fence after Wal-Mart released a disappointing earnings report.

The Dow Jones industrial average (search) tumbled 110.77 points, or 1.08 percent, to end at 10,189.48. The technology-laced Nasdaq Composite Index (search) lost 7.67 points, or 0.39 percent, to end at 1,963.88, while the broader Standard & Poor's 500 (search) index ended lower 11.75 points, or 1 percent, at 1,159.36.

The second straight day of declining oil prices helped move markets lower. U.S. crude settled lower $1.91 to $48.54 a barrel in trading on the New York Mercantile Exchange. High oil prices crimp corporate profits and consumer spending and a fall is generally beneficial for the overall market. However, dropping prices negatively effect large energy firms.

Energy stocks lost ground due to the price drop and weighed on the Dow. ExxonMobil (XOM) fell 4.3 percent, or $2.47, to $54.82 and ConocoPhillips (COP) was down 4.78 percent, or $5.04, to $100.32. Exxon Mobil was the biggest drag on both the Dow average and the S&P 500, while ConocoPhillips also helped pull the S&P 500 lower.

Stocks had been trading near unchanged levels until midday, when Moody's downgraded Ford Motor Co.'s (F) debt to the lowest investment-grade status. Ford shares fell 29 cents, or 3 percent, to $9.35.

Earlier, Ford's stock was down almost 4 percent to a session low of $9.27 after word from traders in London that the company suspended sales of its commercial paper, which was seen as a sign of significant upcoming news.

Investors had been jittery all morning after Wal-Mart Stores Inc. (WMT) released a profit report before the opening bell that missed forecasts and stoked fears of a softening economy.

Wal-Mart (search) reported early Thursday first-quarter earnings of $2.46 billion, or 58 cents a share, up from $2.17 billion, or 50 cents a share, a year earlier. Excluding items, the retail giant report first-quarter earnings of 55 cents a share. A Thomson First Call survey had forecast first-quarter earnings at 56 cents a share. Wal-Mart fell 2 percent, or 95 cents, at $47.65.

However, Target Corp. (TGT) climbed 1.2 percent, or 60 cents, to $48.80 after the retailer posted robust sales for the quarter and saw earnings rise 15 percent. The company beat Wall Street's profit forecasts by 2 cents per share.

"Wal-Mart didn't help, that's for sure, even though the retail sales number was stronger than expected," said Todd Clark, head of listed trading at Wells Fargo Securities.

"I'd say the energy stocks and the Ford downgrade are the catalysts here — people are afraid this whole hedge fund thing is going to come out of the woodwork again," Clark added.

On the positive side, the government released an economic report that showed retail sales jumped 1.4 percent in April. It was the strongest showing in six months, as consumers streamed back into auto showrooms and shopping malls, the Commerce Department reported Thursday.

Last month's increase was far better than the 0.8 percent gain many analysts had been expecting and represented a significant rebound from the lackluster 0.4 percent increase in March.

In corporate news, embattled Wall Street firm Morgan Stanley (MWD) fell 45 cents to $49.40 after a group of dissident shareholders publicized their plan to spin off the company's investment banking business from the rest of the firm, essentially reversing its 1997 merger with Dean Witter & Co. The dissidents claim their plan was developed with the help of institutional shareholders.

Also Thursday, 3M Co. (MMM) agreed to purchase filtration products maker Cuno Inc. (CUNO) for $1.35 billion in cash and assumed debt, a deal that would expand 3M's reach in the liquid- and gas-filtration market. 3M fell 1.6 percent, or $1.21, to $75.78, while Cuno surged 29 percent, or $16.03, to $70.85.

Apple Computer Inc. (AAPL) continued to fare poorly two days after Yahoo Inc. (YHOO) announced it would launch a competitor to the iTunes online subscription music service. Apple shares fell 4.2 percent, or $1.48, to $34.13.

Trading in stocks was active, with 1.58 billion shares changing hands on the New York Stock Exchange, above the 1.46 billion daily average for last year. About 1.79 billion shares were traded on Nasdaq, just below the 1.81 billion daily average last year.

Declining stocks outnumbered advancers on the New York Stock Exchange by 24 to 9 and on Nasdaq by roughly 19 to 11.

The Russell 2000 index of smaller companies was down 8.68, or 1.5 percent, at 586.89.

Overseas, Japan's Nikkei stock average fell 0.38 percent. In Europe, Britain's FTSE 100 was up 0.37 percent, Germany's DAX index rose 0.54 percent, and France's CAC-40 gained 0.91 percent for the session.

Reuters and The Associated Press contributed to this report.