Stocks fell after Wal-Mart Stores, Deere and Gateway cut their annual profit forecasts. The Standard & Poor's 500-stock index had its steepest loss in almost four months.
Wal-Mart led a decline in retailers as the company blamed record gasoline prices for crimping consumer spending. Average retail prices for regular gasoline are 36 percent higher than a year ago.
"The aftershock of energy prices" is "affecting the psyche of the market," said Peter Wall, who oversees $60 billion as chief investment strategist at J.P. Morgan Private Client Services in New York. "If energy prices continue to go up, we're at a point where it has to hit the consumer and it has to hit businesses."
The S&P 500 retreated 14.53, or 1.2 percent, to 1219.34, for its biggest slump since April 20. The Dow Jones industrial average fell 120.93, or 1.1 percent, to 10,513.45. The Nasdaq composite index fell 29.98, or 1.4 percent, to 2137.06.
Wal-Mart slid $1.53, or 3.1 percent, to $47.57, for the worst performance in the Dow average. The world's largest retailer said it expects full-year profit of $2.63 to $2.70 a share. In May, it forecast earnings of as much as $2.74 a share.
Home Depot and J.C. Penney declined even after the companies posted better-than-expected results, as a gauge of retailers fell 2.6 percent, the steepest drop among 24 industry groups in the S&P 500. Home Depot fell 94 cents, to $40.67. J.C. Penney slid $2.16, to $49.74.
Dick's Sporting Goods declined $6.33, or 16.1 percent, to $32.90, for its biggest one-day loss, after its earnings forecast fell short of analysts' estimates.
Gateway tumbled 78 cents, or 20 percent, to $3.11, for the worst performance in the S&P 500. The No. 3 U.S. personal-computer maker lowered its prediction for full-year profit.
Delta Air Lines advanced 19 cents, or 13.7 percent, to $1.58, for the best performance in the S&P 500. The carrier, which is trying to avoid filing for bankruptcy protection, agreed to sell its Atlantic Southeast Airlines commuter unit to SkyWest for $425 million. Shares of SkyWest advanced $2.97, to $25.01.
New York Stock Exchange composite index fell 84.62, to 7480.16.
American Stock Exchange index fell 12.26, to 1621.14.
Russell 2000 index of smaller-company stocks fell 11.03, to 654.61.
NYSE: 1.81 billion shares, up from 1.56 billion on Monday. Decliners outnumbered advancers 7 to 3.
Nasdaq: 1.52 billion shares, up from 1.37 billion. Decliners outnumbered advancers 8 to 3.
Crude oil for September delivery: $66.08, down 19 cents.
Gold for current delivery: $446.10 a troy ounce, up from $442.20 on Monday.