$56 oil price
hurts stocks

NEW YORK » Wall Street stumbled yesterday after crude oil prices shot up to another new high, passing $56 a barrel and raising the specter of higher inflation and interest rates. General Motors Corp.'s grim outlook for its first quarter took an added toll on the Dow Jones industrials, which fell more than 110 points.

Investors were already inclined to sell following the Commerce Department's report that the U.S. deficit in the broadest measure of international trade soared to a record $665.9 billion last year, 25.5 percent above the previous record set in 2003. The growing deficit is bad for the dollar and, Wall Street feared, could be an indicator of inflation.

The breadth of the market's decline suggested investors were interpreting the surge in oil prices as a warning sign that inflation could be the next big worry for the economy, analysts said.

Oil prices had started the day lower after OPEC ministers said they would increase output, but the price of crude jumped $1.41 to close at $56.46 a barrel in New York, a new high, after the Department of Energy released data showing domestic supplies of gasoline and heating oil fell sharply last week.

"Inflation is really spooking the market in a way that it hadn't before," said Brian Pears, head equity trader at Victory Capital Management in Cleveland.

The Dow finished down 112.03, or 1.04 percent, to 10,633.07.

Broader stock indicators also dropped. The Standard & Poor's 500 index fell 9.68, or 0.81 percent, to 1,188.07, while the Nasdaq composite index fell 19.23, or 0.94 percent, to 2,015.75.

The resurgence of oil prices worried investors that even the move by OPEC would not be enough to outweigh growing demand for energy. Higher oil prices could harm various sectors of the economy, raising the costs for heating, transportation, and putting upward pressure on prices that consumers pay. That, in turn, raises the specter that the Federal Reserve might become more aggressive in its interest rate policy.

Before trading began, GM, the world's largest automaker, said it would post a first-quarter loss of about $1.50 per share, compared with its previous forecast of break-even or better. The drop in GM weighed on the broader market, with investors looking to it as a bellwether for other big companies struggling with high fixed costs, said analyst Art Hogan.