Stocks declined Thursday as oil worries and disappointing earnings forecasts from the food and housing sectors sparked worries about profit growth for the second half of the year.

The Dow Jones industrial average (search) was down 37.57 points, or 0.35 percent, at 10,595.93. The Standard & Poor's 500 Index (search) was down 4.69 points, or 0.38 percent, at 1,231.67. The technology-laced Nasdaq Composite Index (search) was down 6 points, or 0.28 percent, at 2,166.03.

The rise in fuel prices following Hurricane Katrina's destruction has investors worried about consumer spending and the outlook for corporate profits. An inventory report from the Energy Department showed the nation's oil and gasoline stockpiles fell considerably, although the losses were less than Wall Street expected. A barrel of light crude settled at $64.49, up 12 cents, on the New York Mercantile Exchange (search).

"Higher energy costs and the hurricane are going to put pressure on earnings for some companies," said Liz Ann Sonders, chief investment strategist at Charles Schwab. "Third-quarter earnings are simply not going to be so stellar as in the past quarter."

With oil remaining in the mid-$60 per barrel range, investors were concerned that both corporate earnings and consumer spending would drop due to high energy costs. Investors also worried that the Federal Reserve (search) would continue to raise interest rates at its Sept. 20 meeting. Despite Katrina's devastation and death toll, the harm to the U.S. economy was less than originally expected, and hopes of a halt in rate hikes dimmed.

"I think the Fed's in a box here, and they really don't have a choice but to raise rates," said Michael Chren, portfolio manager for the Allegiant Funds. "Rebuilding from the hurricane will be an economic positive next year, you have concerns about inflation, and you have the housing bubble. I don't think they can stop."

Investors' preoccupation with oil and interest rates caused them to look past a surprising drop in first-time jobless claims. The Labor Department (search) reported the number of new unemployment claims fell to 319,000 last week, 1,000 less than the prior week. More claims, however, are expected in the coming weeks from workers displaced by the Gulf Coast disaster.

"The economic data over the next several weeks are going to be difficult to interpret, and it'll be interesting to see how the market reacts," said Michael Sheldon, chief market strategist at Spencer Clarke LLC.

"The rally the past few days shows investors are willing to look past this period of uncertainty toward a pickup in growth in early 2006. It's a pretty optimistic viewpoint and that could change when the data comes in."

The latest Commerce Department report on wholesale inventories surprised investors. Inventories fell 0.1 percent in July, down sharply from the 0.6 percent rise economists had expected and the 0.7 percent jump the previous month.

Coca-Cola Enterprises Inc. (CCE), the No. 1 U.S. soft drink bottler, declined 9.5 percent to $19.99 after the company said third-quarter earnings would fall short of analysts' consensus. The warning sent shares of Coca-Cola Co. (KO) down 0.8 percent to $44.28 and helped drag down both the Dow Jones and the S&P indexes.

Luxury home builder Hovnanian Enterprises Inc. (HOV) slid 6.6 percent to $57.49 a day after the home builder reported quarterly earnings that missed Wall Street estimates. . A Dow Jones index of home builders fell more than 2 percent.

"What is playing more into the market is probably earnings concerns. Hovnanian and Coca-Cola Enterprises are weighing, but Apple seems to be keeping Nasdaq from going down further," said Larry Peruzzi, senior equity trader at The Boston Company Asset Management.

Apple Computer Inc. (AAPL) rose 2.2 percent to $49.78 after CSFB and Piper Jaffray raised their price targets. Apple made several new product announcements on Wednesday.

In more technology news after the market's close, Texas Instruments Inc. (TXN), the world's biggest maker of semiconductors for mobile phones, raised the high end of its range of expected results for the current quarter. Texas Instruments ended the regular session up 1.3 percent at $33.75 and was up more than 2 percent to $34.50 on Inet.

Shares of eBay Inc. (EBAY) fell $1.53 to $38.93 after newspaper reports had the online auction company in talks to acquire Swedish firm Skype Technologies SA, which creates software to allow free phone calls over the Internet, for $2 billion to $3 billion.

The Wall Street Journal reported that Ford Motor Co. (F) could agree to sell its Hertz rental car division as early as Friday, with a group of private investors reportedly paying up to $6 billion for the unit. Ford stock lost 21 cents to $9.92.

Sears Holdings Corp. (SHLD) shares tumbled $7.04 to $127.81 after the company's quarterly earnings missed Wall Street profit forecasts by 38 cents per share, due in part to restructuring costs. The company also named Alywin Lewis as its new chief executive officer, replacing Alan Lacy, who will remain vice chairman and a director of the retailer.

News Corp. (NWS) said it will spend about $650 million in cash to acquire privately held IGN Entertainment Inc., creator of popular video game Web sites. The purchase will bolster Fox Interactive's network of sites. News Corp. dropped 5 cents to $17.27. News Corp. is the parent company of the Fox News Channel, which operates FOXNews.com.

On the NYSE, about 1.44 billion shares were traded, below the 1.46 billion daily average for last year and on Nasdaq 1.6 billion shares changed hands, below the 1.81 billion daily average.

Decliners outpaced decliners on both the NYSE and Nasdaq by a ratio of about 2 to 1.

The Russell 2000 index of smaller companies fell 3.85, or 0.57 percent, to 673.47.

Overseas, Japan's Nikkei stock average fell 0.58 percent. In Europe, Britain's FTSE 100 was down 0.47 percent, France's CAC-40 lost 0.45 percent for the session, and Germany's DAX index rose 0.09 percent.

Reuters and the Associated Press contributed to this report.