The FTSE 100 (UK:UKX: news, chart, profile) index dropped 0.3%, or 19 points, at 5,803.

Other European indexes turned lower after early weakness on Wall Street following better-than-forecast U.S. retail sales. See market snapshot.

A strong new retail sales report indicated the slowing will not be extreme, but did little to help prices in the early going.

The Dow Jones Industrial Average last was down 25 points at 11,098.

The S&P 500 and the Nasdaq Composite were down 3 points at 1,268 and down 8 points at 2,063.

Higher sales were seen across the board, from electronics to clothing. Sales of durable goods were particularly strong.

The retail figures were at odds with the Federal Reserve's forecast for a slowdown in growth, said Robert Brusca, chief economist for FAO Economics. But other economists said it was too early to tell about consumer spending.

Auto sales surged 3.1% in July, also the biggest gain since January. Automakers restored sales incentives to move vehicles off the lots.

Excluding autos, retail sales increased 1%.

Gasoline sales jumped 2.5% on higher prices. Excluding gasoline, retail sales rose 1.3%. The figures are not adjusted for inflation.

Excluding both autos and gas, sales were up 0.7%, also the best since January.

The figures were higher than expected on Wall Street, where economists surveyed by MarketWatch were reckoning on a gain of 0.8% for retail sales and a 0.5% increase in sales excluding autos. See Economic Calendar.

Treasury prices slipped following the report, sending yields higher. Stock futures flattened. See Indications.

The futures contract for the Dow Jones Industrial Average last was down 5 points at 11,145.

Futures contracts for the S&P 500 and the Nasdaq 100 were up 0.30 point at 1,275.80 and up 1 point at 1,498.5.

On Thursday, stocks closed higher, after investors cheered the fact that U.K. authorities had apparently thwarted a terror plot to blow up U.S.-bound flights, with an accompanying decline in oil prices underpinning gains.

Many analysts believe investors have learned to live with terrorism. Even significant attacks or attempted attacks no longer prompt the heavy selling see in the wake of September 11, 2001.

S&P 500 futures rose 1.3 points at 1,276.80 and Nasdaq 100 futures improved 3.25 points at 1,500.75. Dow industrial futures rose 4 points.

Investors also remain preoccupied with the state of the economy after the Federal Reserve decision earlier this week to pause in the bank's rate-tightening program. There's concern about a possible slowing of the U.S. economy and corporate earnings.

The U.K. FTSE 100 index (UK:UKX: news, chart, profile) lost 0.6% at 5,823, the German DAX Xetra 30 index (DX:1876534: news, chart, profile) declined 1.3% at 5,630 and the French CAC-40 index (FR:1804546: news, chart, profile) fell 1% at 4,976.

Markets finished off lows of the day after U.S. markets shook off early losses in New York trade. See Market Snapshot.

S&P 500 futures dropped 3.6 points at 1,267.80 and Nasdaq 100 futures shed 4.75 points at 1,490.25.

The U.K. FTSE 100 index (UK:UKX: news, chart, profile) lost 1.3% at 5,785, the German DAX Xetra 30 index (DX:1876534: news, chart, profile) declined 1.8% at 5,601 and the French CAC-40 index (FR:1804546: news, chart, profile) fell 1.2% at 4,964.

The pan-European Dow Jones Stoxx 600 index (ST:SXXP: news, chart, profile) dropped 1% at 323.39, with travel and telecom stocks leading decliners.

Investors on Wednesday tried to come to terms with an unfolding monetary-policy outlook that could include renewed rate increases in the coming weeks.

The Dow Jones Industrial Average closed down 97.41 points at 11,076.18 and the S&P 500 down 5.53 points at 1,265.95.

The Nasdaq Composite was nearly flat at the close, ending 0.57 point lower at 2,060.28.

There were a little more than 1.7 billion shares traded on the New York Stock Exchange and about 2.1 billion in the Nasdaq market. Falling shares outnumbered stocks with gains by 19 to 13 on the NYSE and by 17 to 11 in the Nasdaq market.

"The market has been weakening since the opening," said Peter Boockvar, equity strategist at Miller Tabak. "Stocks have been getting weaker because people are still worried about the economy and earnings. The only reasons they were higher was the earnings from Cisco and Disney."

On Tuesday, the Federal Reserve held back from lifting rates for the first time since June, 2004, keeping the overnight inter-bank lending rate at 5.25%.

However, the accompanying statement made clear the Fed is reserving the right to raise rates again, possibly as early as next month, disappointing investors who had hoped for a clearer signal that the tightening cycle had ended.

While many investors had hoped for a pause in rate hikes, the reasons behind the halt concerned some analysts.

There were varied reactions to both the pause and the outlook. "The markets certainly haven't shown a clear or decisive reaction," said Robert DiClemente, chief U.S. economist at Citigroup. See full story.

There was limited reaction to news from the Commerce Department that wholesale inventories rose 0.8% in June, while sales increased 1.4%. The increase in inventories was lower than the 0.9% predicted by economists surveyed by MarketWatch, but May inventories were revised upward to show a 0.9% gain from the original estimate of 0.8%.