By Donna Kardos Yesalavich

U.S. stocks declined Thursday as weak earnings and forecasts from retailers weighed, along with final negotiations for the financial-overhaul bill.

The Dow Jones Industrial Average (DJI) was down 100 points, or 1%, to 10,198. Home Depot (HD) was the measure's worst performer with a drop of 2.6%, slumping with other retailers.

Pfizer (PFE) was also weak. The drug company dropped 1.9% after saying it would suspend osteoarthritis trials of its pain drug tanezumab after a "small number" of reports that patients' ailments worsened to the point of needing joint replacement. The company said the suspension followed a request by the Food and Drug Administration.

The Dow's financial components were also among its top decliners, with J.P. Morgan Chase & Co. (JPM) off 2% and Bank of America (BAC) down 1.6%, as U.S. House and Senate lawmakers sought to reach agreement Thursday on the final pieces of legislation that is expected to tighten oversight of the financial industry more than many had expected.

On Thursday, lawmakers agreed on new capital requirements that will give large banks five years to stop treating trust-preferred securities as Tier 1 capital, a key measure of a bank's strength. The deal is a win for Senate Banking Committee Chairman Christopher Dodd, who needed to protect the capital standards provision in order to keep its author, Sen. Susan Collins (R., Maine), on board with the broader bill.

"The big banks are not welcoming it. They will react negatively in the short term," said Joe Heider, principal at Rehmann. "But once there's some certainty about the regulations, in the long term it benefits the financials as well as the market because they will figure out a way to prosper out despite the regulations."

The Nasdaq Composite Index (RIXF) declined 1.2% to 2,227. The Standard & Poor's 500 Index (SPX) slipped 1.1% to 1,080, with its consumer-discretionary and financials sectors leading the drop.

In the consumer-discretionary sector, Bed Bath & Beyond (BBBY) dropped 4.3%. The house wares retailer's fiscal first-quarter profit climbed 58%, but its current-quarter earnings outlook fell below analysts' estimates.

Nike (NKE) declined 3.9%. The athletic show and apparel maker's fiscal fourth-quarter profit climbed 53%, but its revenue growth missed analysts' expectations. In addition, Darden Restaurants (DRI), owner of Olive Garden and the Red Lobster chains, fell 4.9% after reporting its fiscal fourth-quarter earnings fell 6% as sales slipped.

The results pulled other consumer-discretionary stocks lower, especially retailers. J.C. Penney (JCP) dropped 5.8%, Macy's (M) slipped 5.6% and Nordstrom (JWN) slid 4.4%.

U.S. economic data were mixed. Weekly jobless claims fell more than expected, and there was a smaller-than-feared drop in durable-goods orders. However, manufacturing activity in the Federal Reserve Bank of Kansas City's district slowed in June. Of greater worry, producers grew more cautious about the future and employment turned negative again, according to data released by the bank Thursday.

The manufacturing data added to investors' worries a day after the Federal Reserve's policy-making body kept its key interest rate near zero, as expected, but cast its policy statement with more downbeat language. "Financial conditions have become less supportive of economic growth on balance, largely reflecting developments abroad," namely in Europe, the central bank said in its Wednesday statement.

The euro edged up to $1.2318 recently, reversing earlier declines. The U.S. dollar index (DXY), reflecting the U.S. currency against a basket of six others, was flat. Treasurys rose, pushing the yield on the 10-year note down to 3.08%. Crude-oil futures fell below $76 a barrel while gold futures advanced.

Among stocks in focus, Lennar (LEN) dropped 1.3%. The home builder swung to a fiscal second-quarter profit, easily beating analysts' estimates, helped by higher revenue. However, orders and deliveries fell.

Hasbro (HAS) shares rose 2.2%. Private-equity firm Providence Equity Partners approached the toy maker to take the company private in a leveraged buyout, people familiar with the matter said. Hasbro said its board has no interest in pursuing a transaction.