Blue chips fell Thursday as carmaker General Motors Corp. declined after reporting lower sales, while energy stocks rallied in the wake of Hurricane Katrina.

The Dow Jones industrial average (search) was down 21.97 points, or 0.21 percent, at 10,459.63. The Standard & Poor's 500 index (search) was up 1.26 points, or 0.10 percent, at 1,221.59. And the technology-laced Nasdaq Composite Index (search) fell 4.19 points, or 0.19 percent, at 2,147.90.

GM (GM), the world's largest automaker, said U.S. sales fell 16 percent last month, pushing its shares down 3.5 percent to $33. Rival Ford Motor Co. (F) fell 2.4 percent to $9.73.

But energy companies extended gains as gasoline prices at the pump climbed to $3 a gallon in many areas as a result of the hurricane's devastation. The American Stock Exchange index of integrated oil companies posted its largest one-day percentage increase in more than 2-1/2 years, rising 3.1 percent.

Exxon Mobil Corp. (XOM), the world's largest publicly traded oil company, rose 3 percent to $61.68

Expectations the Federal Reserve may slow the pace of rate increases amid signs of a weakening economy and high oil prices helped to limit declines in stocks, analysts said.

The Fed "would stop raising rates in the event that there was clear evidence that economic growth was slowing down," said Michael Malone, trading analyst at S.G. Cowen.

But President Bush, who had lunch with Fed Chairman Alan Greenspan (search) at the White House on Thursday, said Hurricane Katrina would be a short-lived setback for the economy.

"In our judgment, we view this storm as a temporary disruption that is being addressed by the government and by the private sector," Bush told reporters.

Other rising oil shares included Chevron Corp. (CVX), ahead 2.2 percent to $62.75.

Lehman Brothers raised its view on shares of independent oil refiners to "positive" from "neutral." It also raised ratings on integrated petroleum producer ConocoPhillips (COP), which gained 4.5 percent to $68.85.

"You would think that demand for energy shares would have subsided by now, as they already rose a lot," said Ray Rund, an equity analyst at ShakerInvestments in Cleveland, Ohio. "But investors remain bullish in the sector."

U.S. oil futures for October rose 53 cents to $69.47 a barrel.

Economic data showed that U.S. manufacturing activity declined in August and consumers were dipping into their savings to keep up their spending .

In the retail sector, major chains reported modestly higher August sales at stores open at least a year. Leading the retail sales reports, Wal-Mart Stores Inc. (WMT) reported a 3.3 percent increase in sales for August, just missing Wall Street's 3.4 percent forecast. The gains, however, were positive considering the nation's record gasoline prices, which hit Wal-Mart's lower-income customers disproportionately. Dow component Wal-Mart edged 4 cents higher to $45.

Bargain hunters sought out wholesalers and discounters in August, leading to strong sales, though investors weren't rewarding those stocks due to concerns about September's results. Target Corp. (TGT), which saw a 6.3 percent jump in August sales, dropped 97 cents to $52.78, while Costco Wholesale Corp. (COST) fell 22 cents to $43.18 and BJ's Wholesale Club Inc. (BJ)slid 85 cents to $27.70 even after both companies beat Wall Street's sales estimates.

Convenience store chain 7-Eleven Inc. soared almost 22.3 percent to $34.66. Shares rose after Japan's biggest retailer, Seven & I Holdings Co. offered $1 billion to buy out its U.S. affiliate.

Freddie Mac (FRE) , the U.S. home financing company sponsored by the government, fell after it posted a drop of nearly 60 percent in profits for the first half of 2005. Shares fell 3.6 percent to $58.21.

Trading was heavy on the New York Stock Exchange where gainers beat decliners by nearly 2 to 1. About 1.7 billion shares were traded, above the 1.46 billion daily average for last year.

On Nasdaq, gaining stocks barely outnumbered decliners, and about 1.66 billion shares changed hands, below the 1.81 billion daily average.

The Associated Press contributed to this report.