U.S. stocks dropped, led by banks, retailers and technology companies, on speculation the Treasury's plan to buy soured assets from financial firms will fail to prevent a recession and as a $10-a-barrel jump in oil threatened to damp consumer spending.

The S&P 500 retreated 26.84 points, or 2.1 percent, to 1,228.24 at 2:16 p.m. in New York. The Dow Jones Industrial Average slid 217.99, or 1.9 percent, to 11,170.45. The Nasdaq Composite Index decreased 53.71, or 2.4 percent, to 2,220.19. Three stocks retreated for each that rose on the New York Stock Exchange.

``They really haven't changed the economic fundamentals at all,'' said Jeffrey Coons, co-director of research at Manning & Napier Advisors Inc. in Fairport, New York, which manages $18 billion. ``We still have a debt-laden U.S. consumer facing falling employment. That's going to be overhanging our economy for some time.''

Treasury bonds and the dollar tumbled on concern the U.S. government is spending too much to save banks after the collapse of Lehman Brothers Holdings Inc., Fannie Mae, Freddie Mac and American International Group. Oil, heating oil and copper climbed more than 3.5 percent as the dollar's biggest slide in seven years against the euro heightened the risk of inflation.