(Credit: Bryan Mitchell/AP Photo)

Retail sales fell by 0.4 percent in March, according to the Commerce Department, the biggest drop in nine months. The major stock market indexes slid on the news.

Taxes went up at the beginning of the year for everyone who gets a paycheck and that may finally be affecting consumers' ability to spend. Consumer spending, which makes up two-thirds of U.S. economic activity, is a major barometer of the strength of the economy.

This report was not entirely unexpected as the March jobs report showed a drop in retail employment. It was also a colder than usual March in much of the country and the early Easter holiday may have had an impact on spending.

There were, however, two bright spots in the report. First was a rise in spending at restaurants as Americans may have diverted some cash to eat out more. Spending on furniture also rose, the result of an improving housing market.

On the whole, today's report doesn't bode well for the economy. As economist Joel Naroff explained it in a note, "first quarter growth should be decent, but decent is not good enough nearly four years after the end of the recession."

The Dow Jones industrial average fell 42 points to 14,822 at 11:20 a.m. ET.