U.S. stocks retreated on Wednesday after key U.S. retail sales data came in worse than expected, dampening hopes of a quick economic recovery.

News from Europe also weighed on sentiment as top officials said major European economies still have some way to go before seeing a revival.

Shares in Wal-Mart Stores Inc , the world's biggest retailer and a bellwether for the sector, fell nearly 2 percent to $49.71, while Macy's Inc dropped 4.3 percent to $11.82 after the department-store operator stuck to its full-year outlook for a decline in sales. The S&P retail index <.RLX> fell 2.7 percent.

Government data showed that sales at retailers fell for a second straight month in April. Analysts had forecast no change or even a small increase after disastrous motor vehicle sales were excluded.

The market was topping and retail sales are part of the scenario that things haven't got much better yet, said Carl Birkelbach, head of Birkelbach Management in Chicago. I have become a little bearish here. Consumer spending accounts for two-thirds of U.S. economic activity.

The Dow Jones industrial average <.DJI> lost 153.64 points, or 1.81 percent, to 8,315.47. The Standard & Poor's 500 Index <.SPX> dropped 17.33 points, or 1.91 percent, to 891.02. The Nasdaq Composite Index <.IXIC> fell 35.51 points, or 2.07 percent, to 1,680.41.

But shares of drugmakers rose for a second day as analysts said investors were pulling cash out of the financial and technology sectors in favor of more defensive plays.

Merck & Co Inc added 4 percent to $25.97, while Pfizer Inc

climbed 3 percent to $15.38, and Johnson & Johnson rose 0.7 percent to $55.36. A pharmaceutical sector index <.DRG> climbed 1.42 percent.

The Bank of England said the British economy will recover more slowly than previously thought, and German Chancellor Angela Merkel said she did not expect that economy to return to 2008 levels in 2010.

Shares in Intel Corp fell 0.7 percent to $15.11. The European Commission imposed a record fine of 1.06 billion euros ($1.45 billion) on the world's largest chipmaker for what it said are uncompetitive practices.

Late Tuesday, Intel said its orders and billing patterns have been slightly better than expected so far in the second quarter.

A rally in stocks has faltered as the market digests a series of secondary share offerings by companies that sought to take advantage of increased investor confidence that had pushed major indexes up around 30 percent since early March.

(Reporting by Edward Krudy; editing by Jeffrey Benkoe)

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