NEW YORK – Wall Street's recent winning streak came to a sharp halt on Thursday as inflation fears sent stocks tumbling, with the Dow dropping more than 140 points, marking the biggest one-day drop in almost four months.
The Dow Jones industrial average slid 141.92 points, or 1.22 percent, to end at 11,500.73. The Standard & Poor's 500 Index fell 16.93 points, or 1.28 percent, to finish at 1,305.92. The Nasdaq Composite Index dropped 48.04 points, or 2.07 percent, to close at 2,272.70.
The decline came as investors saw oil prices surge over $73 and gold futures extend to a new 25-year high over $725 an ounce, fueling fears of inflationary pressures. Wall Street was already disappointed that the Federal Reserve on Wednesday didn't signal a definite pause to rate hikes was in sight, even after the Federal Open Market Committee raised a key interest rate to 5 percent.
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Interest-rate-sensitive bank and insurance stocks were among the stocks leading the sell-off, along with technology shares, which lately have been buffeted by disappointing news, including Dell Inc.'s (DELL) profit warning.
"I think there are inflation concerns all over the marketplace right now," said Brian Williamson, equity trader at Boston Company Asset Management. "Because of what the Fed was talking about yesterday, (higher commodities prices) put some anxiety into the marketplace."
Adding to investor worries were decreased profits from insurer and Dow component AIG and media giant Viacom (VIA).
Interest rate concerns weighed on the dollar and bonds, with the yield on the 10-year Treasury note climbing to 5.16 percent from 5.13 percent late Wednesday. The U.S. dollar pulled back from earlier gains against the Japanese yen and was flat versus European currencies.
A lower-than-expected rise in April retail sales lent some support to views that high energy costs will hinder consumer spending and prevent the economy from overheating. However, hefty gains among commodities made investors anxious that inflation could begin affecting core prices — excluding volatile food and energy costs — and bring more interest rate increases.
"The market had priced in a very optimistic Fed outlook, and of course we didn't get it," said Ed Peters, chief investment officer at PanAgora Asset Management. "Secondly, we do have this problem with commodities, and it continues to build."
Crude futures leaped as traders cast aside reports of increased U.S. reserves and worried about a Texas refinery snag and political unrest in Nigeria. A barrel of light crude jumped $1.19 to settle at $73.32 on the New York Mercantile Exchange. Elsewhere, gold prices soared to $725 an ounce, and helped carry copper and silver prices higher.
The Commerce Department said retail sales grew 0.5 percent last month, less than the 0.6 percent increase in March and the 0.8 percent gain economists had predicted. The department also reported that business inventories rose a better-than-forecast 0.7 percent for March as companies kept lean warehouse stockpiles.
Meanwhile, the Labor Department said first-time jobless claims fell by 1,000 to 324,000 last week, above estimates for 315,000 but still evident of the job market's strength.
American International Group (AIG) said late Wednesday its profit slid 16 percent last quarter despite solid results from its general insurance unit. Its earnings missed analyst estimates, but revenue was well ahead of expectations. AIG fell $3.64 to $62.90.
Viacom posted a 9 percent drop in quarterly profit as it accumulated debt for acquisitions and buybacks. However, its earnings came in above Wall Street targets. Viacom was off 72 cents at $38.90.
JCPenney Co. (JCP) said cost-cutting measures boosted its profit by 22 percent, and while the department store chain raised its full-year outlook, the estimate was still below Wall Street views. JCPenney lost $1.47 to $65.44.
UnitedHealth Group Inc. (UNH) slumped $1.69 to $44.48 after the health insurer said it may have to cut $286 million from past earnings because of the way it accounted for stock options.
Declining issues led advancers by more than 3 to 1 on the New York Stock Exchange, where volume of 1.39 billion shares handily beat the 1.22 billion shares that were changing hands at the same point Wednesday.
The Russell 2000 index of smaller companies tumbled 15.72, or 2.03 percent, to 760.22.
Overseas, Japan's Nikkei stock average lost 0.53 percent. Britain's FTSE 100 sank 0.68 percent, Germany's DAX index dropped 1.04 percent and France's CAC-40 was lower by 0.29 percent.
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Reuters and the Associated Press contributed to this report.
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