all Street fell sharply Tuesday after oil prices spiked to a new record above $129 a barrel and a government report raised investors' concerns about inflation. The Dow Jones industrials fell more than 150 points.
Crude jumped after OPEC's president was quoted as saying his organization won't increase its output before its next meeting in September. That sent a barrel of light, sweet crude to a trading high of $129.31 on the New York Mercantile Exchange.
Meanwhile, the government reported that higher energy and food prices might be seeping into other parts of the economy. The Labor Department reported wholesale inflation edged up by 0.2 percent in April following a 1.1 percent jump in March.
Outside of food and energy, prices rose by a faster 0.4 percent _ double what analysts expected.
Rising prices for gasoline and utilities prices are affecting both companies and consumers, and the government report shows price pressures are expanding. Wall Street is concerned that a dropff in consumer spending could ensue if wholesale price increases are passed along; consumer spending is critical because it accounts for more than two-thirds of the U.S. economy.
In midmorning trading, the Dow fell 152.42, or 1.17 percent, to 12,875.74.
Broader market indexes also retreated. The Standard & Poor's 500 index shed 10.69, or 0.75 percent, to 1,415.94, and the Nasdaq composite index dropped 23.95, or 0.94 percent, to 2,492.14.
Bond prices rose. The yield on the benchmark 10-year Treasury note, which moves opposite its yield, fell to 3.80 percent from 3.83 percent late Monday.
Gold prices were higher, and the dollar was mixed against other major currencies.
Concerns about rising inflation, spurred by higher prices for commodities, was the topic of a speech by Federal Reserve Vice Chairman Donald Kohn. The policymaker said he was cautiously upbeat that the economy will recover, and that the central bank ''appears to be appropriately calibrated'' to manage inflation over the medium term.
Meanwhile, the Federal Reserve Bank of Chicago issued a report that showed U.S. economic activity weakened further in April and reached its lowest level since the 2001 recession.
In addition, the International Council of Shopping Centers and UBS Securities showed chain-store sales fell 0.4 percent during the week of May 17, down from 1 percent the previous week. Investors also mined earnings reports from Home Depot Inc., Target Corp., and Staples Inc. for clues about consumer spending.
Home Depot fell 95 cents, or 3.2 percent, to $27.94 after it reported first-quarter profit fell 66 percent amid a continued housing slump.
Target reported that profit dropped almost 8 percent on higher costs, but it was still able to beat expectations. Shares rose 30 cents to $55.22.
Staples said profit rose 1.5 percent during the quarter, and reaffirmed its outlook. Shares rose 14 cents to $23.71.
Banking stocks fell after Oppenheimer & Co. analyst Meredith Whitney said she expects the credit crisis to extend into 2009, and ''perhaps beyond.'' She said firms like JPMorgan Chase & Co. and Citigroup Inc. have set aside $25 billion to cover losses, but might have to set aside about $170 billion by the end of next year.
Citi fell 34 cents to $22.66. JPMorgan, which is holding its annual meeting on Tuesday, dropped 95 cents, or 2.1 percent, to $45.05.
Mortgage finance firm Fannie Mae was in focus after Senate banking committee leaders late Monday announced they are close to a housing bill deal that would help prevent foreclosures. They also plan to change the way the government oversees both Fannie Mae and Freddie Mac.
Fannie Mae fell 72 cents, or 2.5 percent, to $28.23. Freddie Mac declined 72 cents, or 2.6 percent, to $28.23.
Advancers led decliners by a 2 to 1 basis on the New York Stock Exchange, where volume came to 126.5 million shares.
The Russell 2000 index of smaller companies fell 4.31, or 0.58 percent, to 734.14.
Overseas, Japan's central bank kept interest rates steady Tuesday amid lingering worries about a global slowdown. Tokyo's Nikkei closed down 0.77 percent.
In Europe, London's FTSE dropped 1.84 percent, Frankfurt's DAX fell 1.32 percent and Paris' CAC 40 shed 1.54 percent.
05/20/2008 10:17 AM
By JOE BEL BRUNO AP Business Writer
NEW YORK
all Street fell sharply Tuesday after oil prices spiked to a new record above $129 a barrel and a government report raised investors' concerns about inflation. The Dow Jones industrials fell more than 150 points.
