New York – Stocks fell sharply Tuesday as a number of companies warned of profit shortfalls and higher costs, some of which could be passed along to consumers. Concerns over interest rates also pressured stocks after a Federal Reserve official signaled more increases for the future.
The markets were higher in the early part of the session as investors welcomed a decline in crude oil futures, prompted by news that the government could release heating oil reserves to help combat higher heating costs as winter approaches. A barrel of light crude settled at $63.90, down $1.57, on the New York Mercantile Exchange.
Yet the specter of inflation quickly overcame any advances.
Procter & Gamble Co.’s stock was downgraded due to higher raw material prices, and Clorox Co. blamed high energy costs for an expected earnings shortfall and increases in the retail prices of its products, which could exacerbate Wall Street’s inflation fears.
Inflation concerns were heightened as Dallas Federal Reserve Bank president Robert Fisher said inflation was nearing the high end of the Fed’s comfort zone – a clear signal that the Fed will continue raising interest rates.
The Dow Jones industrial average fell 94.37, or 0.9 percent, to 10,441.11.
Broader stock indicators also moved substantially lower. The Standard & Poor’s 500 index lost 12.23, or 1 percent, to 1,214.47, and the Nasdaq composite index dropped 16.07, or 0.75 percent, to 2,139.36.
The Bloomberg Colorado Index, a price-weighted list of companies with operations in the state, fell 3.67 to 315.43.
Bonds edged higher after the previous session’s sell-off, with the yield on the 10-year Treasury note falling to 4.38 percent from 4.39 percent late Monday.
The dollar was mostly lower against other major currencies, while gold prices were flat.
Energy stocks, which have been a market leader for much of the year, led decliners as investors, particularly hedge funds, moved out of oil stocks and into the health care and technology sectors.
