NEW YORK – Wall Street resumed its retreat with another session of steep losses yesterday as declines in oil and gold prices did little to calm anxiety over inflation. The sell-off erased the Dow Jones industrial average's gains so far in 2006.
Investors struggled to make sense of the Labor Department's May producer price index, which showed a mild uptick in wholesale prices but a stronger-than-forecast rise in inflation without food or energy costs. The data suggested that energy costs did not grow as much as expected, but the higher core prices nonetheless kept the market on edge.
While a downturn in commodities fed some hopes about easing inflation, persistent uncertainty about whether the Federal Reserve will continue boosting interest rates left investors unwilling to buy stocks amid fears of an economic crash.
Gold fell the most in 15 years, dropping below $600 an ounce, and copper tumbled to a seven-week low as investors bailed out of commodities and equities on concern that rising interest rates will slow the global economy.
Metals fell for a fourth straight session, the longest slide in three months, and billionaire investor George Soros says the commodity rout isn't over.
The continued inversion of short-and long-term bond yields was evidence of the market's expectations of an economic slowdown.
The Dow tumbled 86.44, or 0.8 percent, to 10,706.14, after losing nearly 100 points on Monday. The Dow is now down 0.11 percent for 2006.
Broader stock indicators pulled back and widened their losses for the year. The Standard & Poor's 500 index dropped 12.71, or 1.03 percent, to 1,223.69, and the Nasdaq lost 18.85, or 0.9 percent, to 2,072.47.
Declining issues topped advancers by about 4 to 1 on the New York Stock Exchange, where consolidated volume of 3.37 billion shares led the 2.34 billion shares that changed hands Monday.
Overseas stock markets continued suffering from concerns that rising interest rates will U.S. demand for foreign-made products. Japan's Nikkei stock average plunged 4.14 percent to a two-year low, and stocks in India slid 4.4 percent to a 52-week low.
Elsewhere overseas, Britain's FTSE 100 lost 1.8 percent, Germany's DAX index sank 1.92 percent and France's CAC-40 was lower by 2.24 percent.
Bonds drifted, with the yield on the 10-year Treasury note slipping to 4.97 percent from 4.98 percent late Monday. However, the 2-year yield slipped to 5.01 percent from 5.02 percent; the inversion of yields signaled heightened expectations for slowing economic growth.
The U.S. dollar gained on the Japanese yen and was little changed against European currencies.; gold prices plunged to about $570 per ounce and carried other metals lower, which bode well for the inflation outlook.
Crude futures plunged as Tropical Storm Alberto posed less of a threat to U.S. refineries in the Gulf of Mexico.
The Russell 2000 index of smaller companies dipped 10.47, or 1.53 percent, to 672.72.
Bloomberg News contributed to this report.
