NEW YORK (AP) - Wall Street retreated sharply yesterday on more signs of economic weakness and executive shake-ups at two major banks - reminders of the ongoing fallout from the credit crisis. The Dow Jones industrial average fell more than 130 points.

Two key economic reports indicated that the economy is still struggling. As expected, the Institute for Supply Management's manufacturing index for May showed its fourth straight monthly decline, while the Commerce Department said construction spending dipped in April for the sixth time in seven months due to a drop in home building.

The market drew no comfort from the ailing financial sector, either. As the financial system still contends with the aftermath of the nation's prolonged credit problems, Wachovia Corp. chief executive Ken Thompson was forced out yesterday, and Washington Mutual Inc. is taking the chairman role away from chief executive Kerry Killinger.

Mr. Thompson has become the third CEO of a major US financial institution to lose the top job as a result of the credit crisis.

In addition, British lender Bradford & Bingley issued a poor financial outlook and said it is selling a 23 percent stake to a private equity firm, while the ratings agency Standard & Poor's Corp. (S&P) downgraded Merrill Lynch & Co., Morgan Stanley and Lehman Brothers Holdings Inc. and revised Banc of America Corp. and JPMorgan Chase & Co.'s outlooks to negative.

S&P's review of the financial sector suggested there could be more write-downs coming, though likely not as large as in recent quarters, and "further sharp deterioration" in mortgage loan portfolios and residential construction".

Brian Gendreau, investment strategist for ING Investment Management, said the markets have been "hypersensitive about anything to do with credit" in recent months, and the combination of the S&P cuts, the bank news and comments in an overseas speech by US Treasury Secretary Henry Paulson weighed on the market.

"Basically, he suggested that there were further problems to come in the banking and financial sector," Mr. Gendreau said. "That's just toxic for stocks."

Crude oil prices did not give investors any respite. After slipping last week and moving lower in early trading, light, ight, sweet crude for July delivery rose 41 cents to settle at $127.76 a barrel on the New York Mercantile Exchange.

According to preliminary calculations, the Dow Jones industrial average fell 134.5, or 1.06 percent, to 12,503.82, after gaining last week on better-than-expected economic data and a pullback in oil prices. The blue chip index had shed more than 200 points during the session.

Broader stock indicators also dropped yesterday. The S&P 500 index fell 14.71, or 1.05 percent, to 1,385.67. The Nasdaq composite index fell 31.13, or 1.23 percent, to 2,491.53.

Government bonds rose as stocks pulled back. The 10-year Treasury note's yield, which moves opposite its price, fell to 3.97 percent from 4.06 percent late on Friday.

High energy costs have been hurting both companies and consumers, who still face falling home prices.

Real estate data company Radar Logic said yesterday that only one of the 25 metropolitan areas it tracks - Milwaukee - saw a rise in real estate values in March.

Mr. Paulson, during a speech in Abu Dhabi, said there are no "quick remedies" for rising energy prices, which he attributed to high demand and limited supplies. "The Gulf region alone cannot alleviate the pressures," Mr. Paulson said. He also said the housing and capital markets are working through their issues, but he expects that to continue "for some time".

In its manufacturing data Monday, the ISM said commodity prices for the manufacturing sector rose at a faster rate in May than in April.

After announcing its CEO's departure, Wachovia shares fell 37 cents, to $23.43 in afternoon trading, after earlier falling to $22.72, their lowest point since 1995. WaMu shares fell five cents to $8.97.

Lehman fell $2.98, or 8.1 percent, to $33.83. Morgan Stanley lost $1.13, or 2.6 percent to $43.10 and Merrill fell $1.30, or 3 percent, to $42.62.

And weighing on the Nasdaq, shares of ImClone Systems Inc. fell $2.64, or 6.1 percent, to $40.94 on disappointment over trial data for its drug Erbitux as a treatment for lung cancer and colorectal cancer.

Declining issues outnumbered advancers by about three-to-one on the New York Stock Exchange, where volume was 1.17 billion shares.