Wall Street declined today as a mild recovery in oil prices sapped the momentum from the previous day’s big stock rally.

Following yesterday’s 152-point gain in the Dow Jones industrial average, investors were cautiously watching oil again. Having dropped by more than $9 a barrel over the last two days, crude rose $1.19 to $137.23 a barrel on the New York Mercantile Exchange.

Oil rose after missile testing in Iran rekindled worries that political tension in the Middle East would lead to supply disruptions. Crude supplies in America, meanwhile, were down last week, the government reported today.

Investors were somewhat heartened by Alcoa Inc.’s earnings, which began the second-quarter earnings season after the market closed yesterday. The aluminum producer reported a profit decline of 24 percent due to increased production costs — better than anticipated — though its shares slipped 7 cents to $32.26 after trading higher.

With dismal bank and lender earnings expected in the coming weeks, investors hesitated to jump back into stocks, which have been moving into bear market territory. Many financial services companies declined Wednesday, including government-sponsored lenders Freddie Mac and Fannie Mae. Merrill Lynch & Co. also dropped, after Fitch Ratings put its long-term credit default rating on watch for a possible downgrade.

Investors are bracing for financial companies to take another series of major credit-related write-downs, but the uncertainty about how large they’ll be is weighing on the market, a senior equity strategist at Wachovia Securities, Scott Wren, said.

“As we go into earnings season, it’s going to be much of the same as the first quarter,” Mr. Wren said. “Financials are going to suffer the worst comparisons again; consumer discretionary earnings are going to be down, too.”

In early afternoon trading, the Dow fell 77.02, or 0.68%, to 11,307.19.

The Standard & Poor’s 500 index fell 7.93, or 0.62%, to 1,265.77, while the Nasdaq composite index slipped 23.56, or 1.03%, to 2,270.88.

Declining issues outnumbered advancers by about 8 to 7 on the New York Stock Exchange, where volume came to a relatively light 727.9 million shares.

Bond prices edged higher today. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.86% from 3.89% late yesterday.

The dollar fell against other major currencies. Gold prices rose.

Merrill Lynch fell $1.47, or 4.5%, to $31.30.

Freddie fell $1.59, or 11.8%, to $11.87, while Fannie fell $1.07, or 6.1%, to $16.55. The two companies dragged the broader stock market lower on Monday as worries arose about their cash levels.

Not all financials were struggling though. Ambac Financial Group Inc. continued to rise, adding to gains earlier in the week after it said Monday it was hopeful it would be able to fund a new bond insurance business. Ambac rose 28 cents, or 13.2%, to $2.40.

A negative analyst note about Cisco Systems Inc. weighed on the technology sector. Cisco fell $1.09, or 4.8%, to $21.79 after an RBC Capital Markets analyst cut his price target on the network equipment maker. The CEO recently said technology spending will recover later than the company originally thought.

Today’s calendar of economic data is light. The one notable report was the Mortgage Bankers Association’s weekly application survey — mortgage application volume rose 7.5% during the week ending July 4, the trade group said.

The Russell 2000 index of smaller companies fell 6.69, or 0.98%, to 676.03.

Stock markets overseas rose. Japan’s Nikkei stock average edged up 0.15%. Britain’s FTSE 100 rose 1.64%, Germany’s DAX index rose 1.30%, and France’s CAC-40 rose 1.50%.