NEW YORK — Wall Street fell sharply for a second straight session Tuesday after a hefty jump in wholesale inflation and a drop in new- home construction gave investors more reason to believe an economic recovery is far off. The Dow Jones industrial average dropped 130 points.
The Labor Department said its Producer Price Index rose by 1.2 percent in July, more than double the expected rate, lifting the current annual rate to the loftiest level in 27 years. Even after stripping out food and energy, core prices rose by a higher-than-expected 0.7 percent, the biggest increase since November 2006.
“Maybe investors were hoping to shrug off the challenges of high commodity prices and inflation,” said Jack Ablin, chief investment officer at Harris Private Bank. “But now we find out that perhaps the inflation situation is worse than we thought.”
A rebound in oil prices added to investors’ anxiety, which had abated slightly in recent weeks as crude tumbled from its July record above $147 a barrel to three- month lows.
Oil’s retreat over the past month had given the stock market a brief rally. But aside from August’s commodities drop, there have been few bright spots on Wall Street this summer; the banks are forecasting more losses, the credit markets are still tight, the housing market remains in a slump, and the economy continues to lose jobs — all of which gives investors little reason to buy stocks.
The Dow fell 130.84, or 1.14 percent, to 11,348.55, after losing 180 points Monday. It was the worst two-day performance for the blue-chip index since late June.
Broader stock indicators also declined. The Standard & Poor’s 500 fell 11.90, or 0.93 percent, to 1,266.70, and the Nasdaq composite index fell 32.62, or 1.35 percent, to 2,384.36.
