NEW YORK – Stocks tumbled Tuesday amid a surge in crude oil prices, a sharply weaker dollar and a drop in shares of home improvement companies.
The Dow Jones industrial average (search) closed down 174.02 points, or 1.61 percent, at 10,611.20. The Standard & Poor's 500 Index (search) fell 17.43 points, or 1.45 percent, to 1,184.16. The technology-laced Nasdaq Composite Index (search) was down 28.30 points, or 1.37 percent, at 2,030.32.
All but one of the 30 stocks in the blue-chip Dow Jones industrial average closed the day lower as the Dow and the broader Standard & Poor's 500 index suffered their largest percentage drops in more than five months.
Crude jumped $2.80 to hit a 15-week high of $51.15 a barrel on the New York Mercantile Exchange (search). Oil prices have risen about $5 in the last two weeks amid stronger-than-expected demand growth and disappointing supply forecasts from producers outside OPEC — especially Russia.
"This distressing news about oil prices is really nagging at investors," said Joseph Battipaglia, chief investment officer at Ryan Beck & Co. "It's not enough to break the camel's back, but that pressure will be there for a while."
Meanwhile the dollar suffered its biggest intraday fall against the euro since August as markets worried that central banks were diversifying reserves out of U.S. assets.
South Korea's central bank said on Monday it planned to diversify its reserves, which are the world's fourth largest, into a greater variety of currencies.
Neil Massa, senior trader at John Hancock Funds, said that a weaker dollar could lead to worries of interest-rate hikes to encourage investors to buy U.S. assets.
And after last week's jump in wholesale prices, many investors were bearish on January's Consumer Price Index (search), due out Wednesday, fearing that a jump in consumer prices could be yet another sign of inflation.
"We're very sensistive to any type of inflationary indications that are out there, whether it's the weaker dollar or if it's fear of tomorrrow's CPI number," said Scott Wren, equity strategist for A.G. Edwards & Sons. "Between a lower dollar and higher oil and the bond market a little weak here, you're seeing an inflation scare coming on a little bit."
Home Depot Inc. (HD) fell 4.1 percent to $40.28, weighing on the Dow. The world's largest home-improvement retailer posted higher quarterly profit that matched Wall Street estimates, but analysts said Home Depot's margins raised concern.
In a research note about Home Depot, Goldman Sachs analyst Matthew Fasler noted "mixed margin trends" and traffic declines. He also said investors would likely notice that Home Depot's per-share profit only met average estimates after having beaten them all year.
Federated (FD) fell 2.5 percent to $55.29 on speculation about a merger with rival May Department Stores. Federated, the parent of Macy's and Bloomingdale's, also said first-quarter earnings could slip below the average of analysts' expectations. May's (MAY) shares rose 17 cents to $33.62.
Novartis AG (NVS) added $1.56 to $50.46 as the drug maker announced plans to buy German generic drug maker Hexal AG and U.S. drug maker Eon Labs Inc. (ELAB) for a total of $8.3 billion in cash. Eon Labs surged $2.56 to $30.48.
Chip maker Intel Corp. (INTC) climbed nearly 1 percent to $24.24 and Cisco Systems Inc. (CSCO), whose equipment helps direct Internet traffic, rose 1 percent to $17.48 after Smith Barney added the companies to its focus list.
The Conference Board (search) reported that consumer confidence fell slightly in February, hurt by January's losses on the stock market, continued high energy prices and slow job growth. The independent research group's confidence index fell to 104 from a revised 105.1 in January
Trading in stocks was heavy, with 1.74 billion shares changing hands on the New York Stock Exchange, above last year's daily average of 1.46 billion.
About 2.06 billion shares were traded on Nasdaq, above last year's 1.81 billion daily average. Decliners outnumbered advancers by about 4-to-1 on the NYSE and by about 3-to-1 on Nasdaq.
The Russell 2000 index of smaller companies was down 12.20, or 1.94 percent, at 617.93.
Overseas, Japan's Nikkei stock average fell 0.46 percent. In Europe, Britain's FTSE 100 closed down 0.55 percent, France's CAC-40 dropped 0.5 percent for the session, and Germany's DAX index lost 0.69 percent.
Reuters and the Associated Press contributed to this report.