Feb. 22 (Bloomberg) -- U.S. stocks fell as oil prices climbed above $51 a barrel, spurring concern that higher fuel costs may crimp profit growth. The Dow Jones Industrial Average headed toward its steepest loss since Sept. 22.

``People are still wedded to this notion that what's good for energy is bad for everything else,'' said Jerry Castellini, who helps manage $1.4 billion for CastleArk Management in Chicago. ``It's going to be tough'' this year.

Retailers declined after Home Depot Inc.'s quarterly profit failed to exceed analysts' forecasts and Federated Department Stores Inc. said earnings this quarter may trail analysts' estimates.

The Dow average fell 136.48, or 1.3 percent, to 10,648742 as of 2:11 p.m. in New York. The Standard & Poor's 500 Index dropped 13.10, or 1.1 percent, to 1188.49. The Nasdaq Composite Index slid 18.88, or 0.9 percent, to 2039.74.

Eleven stocks retreated for every three that rose on the New York Stock Exchange. Some 1.2 billion shares changed hands on the Big Board, 12 percent more than the same time a week ago.

Crude oil for March delivery jumped 5.7 percent to $51.10 in New York as colder-than-normal weather in the U.S. and Europe raised demand for furnace fuels.

Home Depot

An S&P 500 measure of retailers fell 1.8 percent, the second- biggest drop among 24 industry groups.

Home Depot lost $1.58, or 3.8 percent, to $40.44 for the worst performance in the Dow industrials. The world's largest home-improvement retailer said earnings rose 9.5 percent, the smallest gain in almost two years. Home Depot's quarterly profit of 47 cents a share matched the average estimate in Thomson Financial's survey of analysts.

Federated, which is reported to be in talks to buy May Department Stores Co., slid $1.46 to $55.26. The company said earnings this quarter will be as much as 50 cents a share, less than the 53-cent average analyst estimate in a Thomson poll.

Wal-Mart Stores Inc. dropped 58 cents to $52.14. The world's largest retailer said on Feb. 17 that lower-income shoppers may be helped as oil prices ease, which would increase the company's sales.

Crude prices closed above $50 a barrel for the first time ever on Oct. 1 and closed at a record $55.17 on Oct. 26, representing a gain of 10 percent. During that period, the S&P 500 retreated 1.8 percent, while Wal-Mart fell 0.6 percent.

Dollar's Decline

Some investors said the dollar's decline today renewed concern about faster interest-rate increases from the Federal Reserve. The dollar fell the most in more than four months against the yen and dropped versus the euro, Korean won and at least 30 other currencies after the Bank of Korea said it plans to diversify its reserves.

``You're seeing an ally is losing faith in the strength of the dollar,'' said Larry Peruzzi, senior equity trader at Boston Co. ``It may put a little bit of a burden on the Fed to get involved and do something. I think it might mean higher rates.''

The dollar fell to 104.11 yen in New York from 105.54 late yesterday in Toronto, according to EBS, an electronic foreign- exchange dealing system. It dropped to as low as $1.3234 per euro from $1.3068.

Gold stocks rose as the weak dollar boosted the metal's appeal as an alternative to U.S. assets. The American Stock Exchange Gold BUGS index rallied 3.1 percent; all 10 of its members advanced.

Newmont Mining Corp., the world's biggest gold producer, added $1.60 to $44.07. Freeport-McMoRan Copper & Gold Inc., owner of the largest gold mine, gained 59 cents to $40.32.

`Another Problem'

Today's slide erased the Dow average's gain for the year. Both the Dow and the S&P 500 retreated for the first week in four last week after Fed Chairman Alan Greenspan suggested to Congress that the pace of interest-rate increases isn't about to slow. The Dow has lost 1.2 percent in 2005, while the S&P has slid 1.9 percent.

The Nasdaq Composite is headed for its fourth consecutive daily decline, bringing its drop this year to 6.2 percent.

``I have not bought a new stock in nearly eight months,'' said Bob Rodriguez, whose $1.8 billion FPA Capital Fund has returned 17 percent annually the past five years. ``Corporate profit margins are at all-time record levels and the odds are that they will be declining from here. That creates another problem for the equity market.''

Medtronic

Medtronic Inc. retreated 66 cents to $52.34. Sales growth at the world's biggest maker of implantable defibrillators may lag behind expectations as the company's markets slow or become more competitive, Credit Suisse First Boston analyst Adam Galeon wrote in a note to clients. Galeon cut his rating on the stock to ``neutral'' from ``outperform.''

Winn-Dixie Stores Inc. shares were suspended from trading by the NYSE as the exchange moved to delist the company. The operator of about 920 supermarkets in the southern U.S. filed for Chapter 11 bankruptcy protection after being squeezed by competition from Wal-Mart and reduced credit from its vendors.

The grocer arranged for an $800 million loan from Wachovia Corp. to keep its stores open during the reorganization, according to court papers.

Benchmark indexes fell even as a private survey showed higher-than-expected consumer confidence. The Conference Board's sentiment index decreased to 104 this month from a revised 105.1 in January. Economists forecast a reading of 103, the median estimate in a Bloomberg News survey.

Semiconductor Shares

A gauge of semiconductor stocks gained 0.5 percent for the best performance among 24 industry groups in the S&P 500. Citigroup Global Markets Inc. boosted its rating on the group to ``overweight'' from ``market weight'' and added Intel Corp. to its list of stocks that it recommends investors buy.

Semiconductor shares may outperform the rest of the market as investors expect pricing of chips to improve, said Tobias Levkovich, chief U.S. equity strategist of Citigroup's Smith Barney unit, in a note to investors.

Intel, the world's biggest computer-chip maker, advanced 2 cents to $24.04 after rising as high as $24.41. National Semiconductor Corp., whose chips boost battery life in mobile phones and laptop computers, added 59 cents to $19.52. Cisco Systems Inc., which Levkovich also added to Citigroup's recommended list, increased 16 cents to $17.46.

Kerr-McGee

Kerr-McGee Corp. surged $3.49, or 5 percent, to $73.99. The oil company said in a statement that investor Carl Icahn and an Icahn-related partnership notified the company that they may buy as much as $1 billion of Kerr-McGee stock.

Level 3 Communications Inc. climbed 40 cents, or 21 percent, to $2.33. The operator of a fiber-optic communications network said it plans to raise $880 million by selling convertible notes.

GlaxoSmithKline Plc's American depositary receipts rose $1.14 to $48.70. Europe's biggest drugmaker jumped after a U.S. advisory panel said on Feb. 18 that Merck & Co.'s Vioxx painkiller and similar treatments should stay on the market, easing investor concerns about regulatory restrictions.

AstraZeneca Plc's American shares advanced $1.44 to $41.25.

Shares of MCI Inc., the second-largest U.S. long-distance telephone company, added 27 cents to $22.58 on expectation that Qwest Communications International Inc. will sweeten its $8 billion takeover offer for the company as soon as this week.

Qwest executives are considering announcing new terms of the company's cash and stock offer as early as Wednesday, said a person familiar with the matter. The Wall Street Journal earlier reported a new offer may come this week. Tyler Gronbach, a spokesman for Qwest, declined to comment. Qwest rose 3 cents to $3.98.

To contact the reporter on this story: Dune Lawrence in New York at dlawrence6@bloomberg.net.

Last Updated: February 22, 2005 14:40 EST