By Caroline Valetkevitch
NEW YORK (Reuters) - Stocks dropped more than 1 percent on Tuesday as record oil prices near $120 a barrel fed concerns about how higher energy costs will affect the economy, while disappointing earnings outlooks also dampened the mood.
An index of airline stocks <.XAL> plunged 11.6 percent to a record low and an index of retailers' shares <.RLX> dropped 2.7 percent as crude oil futures rose $2 to an intraday record at $119.90 a barrel. The weak dollar, as well as Nigerian and U.K. supply glitches, drove crude oil prices higher.
Adding to worries about the economic outlook, microchip maker Texas Instruments Inc
UnitedHealth Group Inc
"(Oil) has done nothing but go straight up, and obviously it has put a damper on any type of economic recovery. At a certain time, the consumer is just going to have to stop spending," said Angel Mata, managing director of listed equity trading, Stifel Nicolaus Capital Markets, in Baltimore.
The Dow Jones industrial average <.DJI> fell 128.25 points, or 1.00 percent, to 12,696.77, after earlier sliding to a session low at 12,656.56. The Standard & Poor's 500 Index <.SPX> was down 13.39 points, or 0.96 percent, at 1,374.93, after earlier hitting a session low at 1,369.74. The Nasdaq Composite Index <.IXIC> was down 35.38 points, or 1.47 percent, at 2,372.66.
"Until we get some better clarity on oil, I don't see how people can be looking out two, three quarters and say things are going to be OK."
On the Nasdaq, shares of online DVD rental company Netflix Inc
Dow component McDonald's Corp
Exchange as the company also said sales fell slightly in March at U.S. restaurants open at least 13 months.
Shares of UAL Corp
(Additional reporting by Cal Mankowski; Editing by Jan Paschal)