The Dow Jones Industrial Average fell 1.4 percent to 12,207.17, while the broader S&P 500 dropped 1.6 percent to close at 1,330.58. The S&P Retail Index declined 2.8 percent to 394.69.
The WWD Composite Stock Index, which tracks retailers, manufacturers and beauty firms, fell 2 percent.
Discounters Wal-Mart Stores and Target continued trading lower. Wal-Mart lost 1.8 percent to close at $48.05, while Target fell 2.5 percent to $51.67.
Action sports apparel retail Zumiez plunged 9.3 percent to $17.44, while specialty retailer Talbots sank 5.9 percent to $7.69.
Sears Holdings Corp. dropped 5.7 percent to $99 after the department store said it would close two stores in Hollywood, Calif., and New York City for “business reasons.”
J.C. Penney Inc. was also down, falling 2.8 percent to $42.41, while Kohl’s Corp. declined 2.9 percent to close at $41.84.
One of the few bright spots was Gottschalks Inc., which made the New York Stock Exchange’s list of biggest gainers, increasing 6.6 percent to $2.41.