NEW YORK - US stocks edged lower on Monday after an unexpected quarterly loss from Wachovia Corp dragged down the financial sector, overshadowing strong gains in energy companies as oil closed at a record.

Goldman Sachs added to the market's negative tone after it said the quarterly earnings season, which is just starting, looks 'awful' and that reports still to come will be generally disappointing and drive the S&P 500 lower in coming weeks.

Wachovia, the No. 4 US bank, fuelled fears about anemic earnings when it said it would cut its dividend, eliminate jobs and raise capital of US$7 billion (S$9.5 billion) after becoming the latest casualty of the global credit crunch. Its stock dropped 8 per cent, while the S&P's financial-sector index fell 2.4 per cent.

'Today all the troubles were in financial services. This is expected to be a big week in earnings and it feels like the calm before a potential storm when we get more earnings information,' said Ms Linda Duessel, market strategist at Federated Investors in Pittsburgh.

Still, energy companies kept index losses in check as the price of oil rose to a record settlement just short of US$112 a barrel.

A surprising rise in US retail sales also helped, after data showed a modest increase in March, pushed up by a jump in gasoline sales, according to a government report.

'Retail sales were a little bit better and there is a rotating into energy due to the belief that the high price of oil could have staying power,' Ms Duessel said.

The Dow Jones industrial average slipped 23.36 points, or 0.19 per cent, ending at 12,302.06. The Standard & Poor's 500 Index declined 4.51 points, or 0.34 per cent, to 1,328.32. The Nasdaq Composite Index dropped 14.42 points, or 0.63 per cent, to 2,275.82.

With earnings season in full swing, investors are taking their trading cues from corporate results. Wall Street analysts expect S&P 500 earnings to show a 13.8 per cent decline in quarterly profits compared with an 11.8 per cent drop projected one week ago, according to Reuters Estimates.

Stocks took a sharp tumble on Friday when economic bellwether General Electric Co reported an unexpected 6 per cent drop in earnings. That raised concerns more companies could miss earnings estimates.

On Monday, Wachovia's stock ended down 8.1 per cent at US$25.55 and was the heaviest weight on the S&P.

Three other Dow components in the banking sector also declined, with shares of Bank of America down 3.7 per cent at US$35.58, Citigroup down 3.6 per cent at $22.51 and JPMorgan Chase & Co down 2.4 per cent at US$41.50.

Among oil companies, shares of Devon Energy gained 2.6 per cent to US$112.06 and Transocean shares rose 4.7 per cent to US$151.89.

Exxon Mobil shares advanced 1.2 per cent to US$89.70 and ranked second among the stocks buoying the Dow average.

In other earnings news, building maintenance supply company W.W. Grainger posted a 12 per cent rise in first-quarter profit, beating analysts' forecasts. Its stock rose 2.2 per cent to US$81.73.

Trading was light on the New York Stock Exchange, with about 1.18 billion shares changing hands, below last year's estimated daily average of roughly 1.90 billion, while on Nasdaq, about 1.63 billion shares traded, also falling short of last year's daily average of 2.17 billion.

Declining stocks outnumbered advancing ones by a ratio of about 3 to 2 on both the NYSE and on Nasdaq. -- REUTERS