Stocks fell Thursday, weighed down by retailers' stocks after a wave of July sales reports that largely lagged Wall Street expectations.

The Dow Jones industrial average (search) fell 87.49 points, or 0.82 percent, to end at 10,610.10. The Standard & Poor's 500 index (search) slipped 9.18 points, or 0.74 percent, to finish at 1,235.86. The technology-laced Nasdaq Composite Index (search) dropped 25.49 points, or 1.15 percent, to close at 2,191.32.

"Investors have been getting too enthusiastic here and we were vulnerable to a pullback and then you add in higher oil prices and the weak retail sales number, and that led to a little cleansing, a small air pocket, in the market today," said Steve Goldman, market strategist at Weeden & Co.

Thursday's pullback comes late in a week in which both the S&P 500 and the Nasdaq tested new four-year highs.

Many of the nation's retailers had a disappointing July, blaming the hot weather for a drop in clothing sales, particularly fall fashions. Other retailers also had lower-than-expected sales, however, leading investors to wonder whether consumers might finally be feeling the pinch from high gasoline and energy prices.

Those concerns were exacerbated by another rise in crude oil futures, which once again broke through $61 per barrel and were near all-time highs. A barrel of light crude settled up 52 cents, or 0.8 percent, at $61.38 a barrel, on the New York Mercantile Exchange (search).

Bonds traded in a narrow range, with the yield on the 10-year Treasury note rising to 4.31 percent from 4.30 percent late Wednesday. The dollar was mixed against other major currencies, while gold prices rose.

The sales reports and oil worries overshadowed a positive employment report from the Labor Department (search). First-time jobless claims fell by 1,000 last week to 312,000. The news bodes well for Friday's monthly job creation report. Economists expect the economy to have created 186,000 jobs in July.

Negative investor sentiment toward retailers also weighed on the shares of blue-chip company Wal-Mart Stores Inc. (WMT) , even though its July sales were at the high end of expectations, and pressured stocks of retailers that did not report July sales, such as No. 1 U.S. home improvement chain Home Depot Inc. (HD), also a Dow component.

Wal-Mart shares declined 0.8 percent, or 39 cents, to $49.29 and Home Depot slipped 2.3 percent, or 95 cents, to $41.28.

The Standard & Poor's 500 retailing index fell 2.2 percent, adding to Wall Street's worries. Retail sales are a broadly watched measure of consumer spending, which represents a bulk of U.S. economic activity.

In the apparel group, decliners outpaced gainers by nearly 5 to 1, with Aeropostale Inc. (ARO) sliding 7.6 percent, or $2.24, to $27.11, and Abercrombie & Fitch Co. (ANF) dropping 6.7 percent, or $4.68, to $65.56.

Department store operator Nordstrom Inc. (JWN) fell 8.2 percent, or $3, to $33.45, and J.C. Penney Co. Inc. (JCP) dropped 4.4 percent, or $2.50, to $53.92 after reporting weaker-than-expected sales.

Among retail and commerce-related shares that dragged the Nasdaq down were Bed Bath & Beyond (BBBY), off 3.1 percent, or $1.40, at $43.75, and eBay Inc. (EBAY), off 1.6 percent, or 72 cents, at $43.83.

The jump in crude oil prices weighed on industrial stocks, which are considered benchmarks of the U.S. economy, with 3M Co. (MMM) down 1.1 percent, or 84 cents, at $73.35, and United Technologies Corp. (UTX) down 1.2 percent, or 58 cents, at $49.52.

Exxon Mobil Corp. (XOM) dropped 48 cents to $58.52 after the company said Chairman and Chief Executive Lee R. Raymond will retire at the end of this year. President Rex W. Tillerson is expected to be named Raymond's successor in both posts.

Gillette Co. (G) dropped 75 cents to $52.20 after posting a 17 percent rise in second-quarter profits due to brisk sales of new products and cost cutting. Procter & Gamble Co. (PG), which is acquiring Gillette, fell 83 cents to $54.17.

Insurance company Prudential Financial Inc.'s (PRU) earnings exceeded Wall Street's forecasts by 5 cents per share, powered by stronger sales across its various divisions. However, investors were disappointed by the company's full-year earnings forecasts, and Prudential slid $1.42 to $66.43.

Credit card issuer Metris Cos. Inc. (MXT) lost 38 cents to $14.46 after it agreed to be purchased by banker HSBC Holdings PLC (HBC) for $1.59 billion, or $15 per share excluding preferred shares. HSBC dropped 63 cents to $81.90 after announcing the move, the latest pairing of a major bank and a credit card issuer. The two independent card issuers remaining made gains, with Capital One Financial Corp. climbing 81 cents to $83.95 and American Express Co. gaining 37 cents to $55.85.

Among gainers, shares of Electronic Data Systems Corp. (EDS) shares surged 8.6 percent, or $1.83, to $23.12 and pharmacy benefits manager Caremark Rx Inc. jumped 5.2 percent, or $2.30, to $46.96 after the companies offered strong outlooks.

Volume was fairly active on the NYSE, where about 1.51 billion shares changed hands, above last year's daily average of 1.46 billion, while on Nasdaq, the pace was more moderate, with 1.63 billion shares traded, below last year's daily average of 1.81 billion.

Decliners outpaced advancers by a 2-to-1 ratio on both the NYSE and the Nasdaq.

The Russell 2000 index of smaller companies fell 11.54, or 1.69 percent, to 671.84.

Overseas, Japan's Nikkei stock average fell 0.82 percent. In Europe, Britain's FTSE 100 closed down 0.32 percent, France's CAC-40 dropped 0.81 percent for the session, and Germany's DAX index lost 1 percent.

Reuters and the Associated Press contributed to this report.