Stocks fell Monday as a stronger-than-expected retail sales report and a key consumer prices reading expected to be released Tuesday fueled investors' fears the Federal Reserve may take a more aggressive stance toward raising interest rates.

The Dow Jones industrial average (search) fell 75.37 points, or 0.72 percent, to 10,334.73, while the broader Standard & Poor's 500 Index (search) gave up 11.21 points, or 0.99 percent, to 1,125.26. The Nasdaq Composite Index (search) ended down 29.88 points, or 1.49 percent, at 1,969.99.

General Motors Corp. (GM) shares weighed on the blue-chip Dow, even after the world's largest carmaker backed its quarterly and 2004 earnings targets. Interest-rate-sensitive financial stocks also fell sharply, with Citigroup and J.P. Morgan Chase & Co. among the Dow's top 10 percentage losers.

Communications gear makers like Cisco Systems Inc. (CSCO) pressured the technology-laden Nasdaq, dragging the S&P Communications Equipment index down 2.5 percent.

Worries about rising interest rates intensified as investors braced for May's Consumer Price Index (search), or CPI, due before Tuesday's market open. Those worries were reinforced after the government reported early Monday that U.S. retail sales in May rose a bigger-than-forecast 1.2 percent, spurred by strong consumer demand and record gasoline prices.

Fed chief Alan Greenspan (search) said earlier last week that Fed policy-makers will do "what is required" to keep inflation in check.

The government said Monday that the U.S. trade deficit widened unexpectedly in April to a record $48.3 billion, as strong consumer demand and the highest oil prices in 21 years pushed imports to record levels.

"Everything's focused on tomorrow's numbers, and how the Fed's going to perceive it. That's put people on edge," said Michael O'Hare, head of block trading at Lehman Brothers.

Recent comments from central bank officials signaled that the Fed could raise interest rates more aggressively than anticipated, perhaps as much as half a percentage point at one of its meetings, O'Hare added. The Fed's next policy meeting is scheduled for June 29-30, with any rate decision expected on the second day.

The strong retail sales report "means consumers are spending, no matter what," said Ozan Akcin, chief market strategist at Puglisi & Co. "Everything's headed in a northerly direction in terms of inflation, and the market's pulling back because people are worried the Fed could raise rates more than expected."

Economists expect that the CPI, the most widely watched inflation gauge, will show a gain of 0.4 percent.

A higher number for the overall May CPI could force the Federal Reserve to lift rates faster than originally planned, economists said. Fed chief Alan Greenspan said last week that the central bank would do "what is required" to keep inflation in check.

U.S. Treasury bond prices fell, sending yields to fresh two-year highs, as bond traders also worried about the possibility of aggressive rate hikes. The price of the benchmark 10-year note dropped 18/32 to 99-1/32, pushing its yield up to 4.88 percent from 4.81 percent last week, while the yield on the two-year Treasury note jumped to 2.94 percent, its highest level since June 2002. The two-year note's price slipped 8/32 to 99-5/32.

In other economic news, the U.S. trade deficit hit a record $48.3 billion in April, prompting the dollar to weaken against the euro. Late Monday afternoon, the euro was at $1.2063, up from about $1.2000 just before the U.S. economic data was released on Monday morning.

Shares of GM, a Dow component, shed 97 cents, or 2 percent, to $47.09, even after it said the outlook for the global auto industry remains strong.

Shares of J.P. Morgan gave up 1.7 percent, or 64 cents, to $37.16, while those of Citigroup, the world's No. 1 financial services company, slid 1.3 percent, or 60 cents, to $46.75.

Wal-Mart Stores Inc. also weighed on the Dow, even after the discount retailer backed its June sales forecast. Shares of Wal-Mart, the world's largest retailer, dropped 82 cents, or 1.4 percent, to $56.38.

On the mergers front, casino operator MGM Mirage shares fell, after the casino operator raised its offer to buy rival Mandalay Resort Group, hoping to seal a deal that would build the world's largest casino empire.

MGM raised its bid to buy Mandalay to $71 a share from $68 a share. MGM shares rose 60 cents, or 1.3 percent, to $48.20, while those of Mandalay slid 82 cents, or 1.2 percent, to $67.60.

Among the Nasdaq's most-active stocks, Cisco fell 50.5 cents, or 2 percent, to $23.315, while Intel Corp. slipped 65 cents, or 2.3 percent, to $27.99.

MGM Mirage Inc. (MGG) raised its bid for Mandalay Resort Group (MBG), now offering $71 a share for the rival casino operator, up from the previously rejected offer of $68 per share. The deal was done in consultation with Mandalay and is likely to be approved. Mandalay dropped 56 cents to $67.86, while MGM Mirage fell $1.13 to $46.47.

Nokia Corp. (NOK) fell 16 cents to $14.08 after announcing production of five new cell phones and promising to regain lost market share. The company declined to give details on its 2004 forecast.

RealNetworks Inc. (RNWK) and Starz Encore Group LLC, a Liberty Media Corp. (L) subsidiary, launched a joint Internet subscription movie service, offering 100 movies per month for $12.95. RealNetworks was up a penny at $6.01, while Liberty Media fell 20 cents to $9.19.

On the New York Stock Exchange, trading was moderate, with 1.18 billion shares changing hands, below the 1.4 billion daily average for last year. About 1.38 billion shares were traded on Nasdaq, below last year's 1.69 billion daily average.

The Russell 2000 index of smaller companies was down 11.45, or 2 percent, at 557.67.

Overseas, Japan's Nikkei stock average slipped 0.3 percent. In Europe, France's CAC-40 tumbled 1.4, Britain's FTSE 100 fell 1.1 percent and Germany's DAX index was down 1.6 percent.

Reuters and the Associated Press contributed to this report.