U.S. stocks fell for the first time this week as higher oil prices and weaker-than-expected consumer confidence revived concern that household spending won't support economic growth.

Drugmakers Pfizer Inc., Merck & Co. and Johnson & Johnson paced the retreat on speculation a Democrat-controlled Congress will reduce subsidies for medicine. A group of health-care stocks in the Standard & Poor's 500 Index fell the most in three years.

Wal-Mart Stores Inc., the world's largest retailer, and Procter & Gamble Co., the biggest consumer-products maker, dropped on the prospect of lower consumer spending.

``The overall data suggests we're still in a slowdown scenario,'' said Eugene Sit, chief executive officer of Sit Investment Associates, which has $6.3 billion in Minneapolis. ``The question on investors' minds is whether this will lead to something more serious and what impact it will have on profits.''

The S&P 500 lost 7.39, or 0.5 percent, to 1378.33. The Dow Jones Industrial Average retreated 73.24, or 0.6 percent, to 12,103.30, a day after closing at a record.

A rally in shares of Cisco Systems Inc., which predicted faster-than-expected sales growth, limited the Nasdaq Composite Index's decline. The Nasdaq slipped 8.93, or 0.4 percent, to 2376.01.

Stocks climbed in the week's first three days as investors bet on companies that would benefit from Democrats' recapturing both houses of Congress. The Dow average is up 13 percent this year on optimism that a slowdown in the economy will not be abrupt and inflation remains in check.

Oil, Economy Watch

Oil climbed to the highest this month after the government said U.S. diesel supplies fell for a fourth week. Crude for December delivery rose 2.2 percent to $61.16 a barrel in New York.

Since touching a record in July, oil has plunged 22 percent. From September through October, crude futures fell 16 percent. That drop is reflected in the latest economic data.

Confidence among U.S. consumers fell. The University of Michigan's preliminary index of consumer sentiment slipped to 92.3 this month from 93.6 in October. Economists in a Bloomberg News survey expected no change. Still, the index stayed close to a 15-month high, supported by cheap gasoline and an expanding labor market.

A Labor Department report showed prices of goods imported into the U.S. fell twice as much as economists expected. Import prices retreated 2 percent in October, matching the previous month's decline. Excluding petroleum costs, import prices slipped 0.6 percent.

The nation's trade deficit narrowed to $64.3 billion in September from a record $69 billion in August, according to the Commerce Department.

`Gotten It Right'

``The broader picture is one of reasonable economic strength and inflation remains tolerable,'' said James Awad, who manages about $1.3 billion as chairman of Awad Asset Management in New York. ``The evidence so far is that the Fed has gotten it right.''

Federal Reserve Bank of Chicago President Michael Moskow yesterday said inflation is a larger risk than slowing growth, and ``additional firming of policy'' may be needed to curb rising prices.

The Fed has kept its target rate at 5.25 percent the past three meetings after 17 straight increases. Policy makers next set rates on Dec. 12.

Health-care shares slid for a second day, losing 2.5 percent for the steepest drop among 10 industry groups in the S&P 500. The sub-index had its largest one-day drop since October 2003 after the Democratic party clinched majorities in both houses of Congress for the first time since 1994.

Pricing Rhetoric

``We're going to see rhetoric about drug pricing,'' said Mark Bronzo, who helps manage $650 million at Gartmore Separate Accounts LLC in Irvington, New York. ``Anything involving drugs, the delivery of drugs and the pricing mechanisms -- those types of stocks -- could potentially be impacted.''

Merck, the fourth-biggest U.S. drugmaker, tumbled $1.46 to $42.88. Pfizer, the largest, retreated 78 cents to $25.84. J&J, maker of the schizophrenia medication Risperdal, declined $1.84 to $66.15.