Wall Street retreated on Thursday following a three-day rally after weaker U.S. economic data and comments from the European Central Bank chief that painted a mixed view on the region's debt crisis.

Energy shares fell after Chevron Corp , the second largest U.S. oil company, said fourth-quarter profit would be significantly below the previous quarter. Chevron was off 2.5 percent to $105.07, while the S&P energy sector <.GSPE> fell 1 percent, the biggest decliner among S&P groups.

ECB President Mario Draghi said the euro zone economy continued to face great uncertainty but saw some signs of stabilization. He said the ECB's flood of cheap loans was helping the banking system substantially.

Retail sales rose at the weakest pace in seven months in December and first-time claims for jobless benefits increased, signs an economic recovery remained shaky.

The data disappointed investors, who had become optimistic about a recovery. After a recent batch of strong reports, some traders anticipated that equities would decouple from Europe's financial woes.

The labor market is improving but as seen today, the pace will continue to be extremely lumpy and possibly tenuous if Europe's recession deepens, said Peter Boockvar, equity strategist at Miller Tabak & Co in New York.

The Dow Jones industrial average <.DJI> fell 37.16 points, or 0.30 percent, at 12,412.29. The Standard & Poor's 500 Index <.SPX> was down 2.74 points, or 0.21 percent, at 1,289.74. The Nasdaq Composite Index <.IXIC> was up 0.57 points, or 0.02 percent, at 2,711.33.

The S&P 500 fell below a five-month high after rising in six of the year's first seven sessions. It closed at 1,292.48 on Wednesday and faced technical resistance near the 1,300 level.

Helping the market's mood, Italian and Spanish government yields fell sharply in debt auctions in countries on the front line of the debt crisis.

Among individual issues, Sears Holdings Corp dropped 4.8 percent to $31.31 after Bloomberg reported CIT Group Inc would no longer finance supplier shipments to the retailer.

Wynn Resorts Ltd slid 5.1 percent to $106.27 after Vice Chairman and major shareholder Kazuo Okada sued the casino operator, accusing it of blocking his attempts to review business accounts despite repeated requests.

(Reporting By Angela Moon; editing by Jeffrey Benkoe)

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