Market pulls back amid inflation fears
NEW YORK » Stocks retreated from lofty heights today after a European Central Bank official pointed to rising price risks and a major Wall Street bank lowered its sales expectations for Chinese Internet company Baidu.com.
The news caused traders to take profits, particularly in the technology sector, from big gains made earlier in the session. The Dow Jones industrial average and the Standard & Poor's 500 index fell from record levels that had been reached after Wal-Mart Stores Inc. lifted its profit forecast.
The market turned in the afternoon after ECB governing council member Axel Weber said rising inflation in the euro zone may require additional policy action, according to Dow Jones Newswires. The comments appeared to raise concerns on Wall Street that European growth could slow and that in the United States, inflation could prevent the Federal Reserve from making another rate cut.
Wall Street's mood was also dampened when JPMorgan Chase & Co. lowered its revenue expectations for Baidu.com Inc., said Kelmoore Strategy Funds portfolio manager Matt Kelmon. That hurt technology companies, which had been rising strongly in recent days.
"Stocks have come a long way really quickly," Kelmon said. "The stocks that have done the best are getting hammered right now."
The Dow sank 63.57, or 0.45 percent, to 14,015.12. Earlier in session, the blue-chip index had soared to a new trading high of 14,198.10.
Broader stock indicators also turned lower after giving back robust gains. The Standard & Poor's 500 index fell 8.06, or 0.52 percent, to 1,554.41. It had reached a new trading high of 1,576.09.
The Nasdaq composite index, which has touched nearly seven-year highs in recent sessions, fell 39.41, or 1.40 percent, to 2,772.20.
The Russell 2000 index of smaller companies fell 10.21, or 1.21 percent, to 834.98.
Declining issues outnumbered advancers by about 5 to 3 on the New York Stock Exchange, where volume came to 1.52 billion shares.
The tech-dominated Nasdaq was hurt by Baidu.com, which tumbled $34.39, or 10 percent, to $308.78.
Bonds pared back their steep losses after stocks fell. The yield on the benchmark 10-year Treasury note, which moves inversely to the price, rose to 4.66 percent from 4.65 percent late Wednesday.
Spiking gold and oil prices heightened some investors' worries about inflation.
Light, sweet crude rose $1.78 to $83.08 a barrel on the New York Mercantile Exchange after the government reported an unexpected drop in crude oil inventories and a surprise increase in refinery activity.
The dollar fell versus the euro but rose against the pound and the yen.
Wal-Mart, the world's largest retailer, raised its third-quarter profit forecast even after reporting its same-store sales rose a weaker-than-expected 1.4 percent in September. Wal-Mart jumped $1.31, or 2.9 percent, to $46.90.
The biggest gainer in the Dow was General Motors Corp., which rose $1.86, or 4.9 percent, to $39.99 after union members ratified a new contract with the automaker.