New York – Wall Street skidded lower Wednesday after an upswing in consumer prices intensified investors’ fears that the Federal Reserve will extend its nearly two-year string of interest-rate increases. The Dow Jones industrial average suffered its biggest one-day loss in three years, and the Nasdaq composite index turned negative for 2006.
Investors were spooked by a Labor Department report that its Consumer Price Index swelled 0.6 percent in April, topping forecasts of 0.5 percent. Core inflation – without food and energy – gained 0.3 percent, ahead of estimates and adding to worries that soaring oil prices have begun to lift prices elsewhere.
The inflation data dragged bonds lower and overshadowed solid earnings from Hewlett-Packard Co. and cooling oil prices. Wall Street has been extremely anxious about economic news after the Fed last week said more rate hikes could be needed to battle inflationary pressures from record commodities prices.
“The CPI data really kicked the market in the teeth today,” said Ken Tower, chief market strategist for Schwab’s CyberTrader.
As the Dow came within 80 points of its best-ever close of 11,722.98 last week, many analysts felt the market was overbought and soon would see a correction. But Tower said stocks are now oversold after several days of steep losses, suggesting that investors may start looking for positive signs to spur buying.
The Dow sank 214.28, or 1.88 percent, to 11,205.61, a one-month low. The Dow slid as much as 245.51 points earlier and logged its biggest single-session slide since falling 307 points on March 24, 2003.
Broader stock indicators also dropped sharply. The Standard & Poor’s 500 index lost 21.76, or 1.68 percent, to 1,270.32, its lowest since finishing at 1,262.86 on Feb. 13; the Nasdaq fell 33.33, or 1.5 percent, to 2,195.80, showing a loss for the first time in 2006.
Declining issues led advancers by nearly 5-to-1 on the New York Stock Exchange.
