Stocks tumble on concerns about economy's strength
NEW YORK -- Investors are concerned that rising inflation — fueled by higher fuel prices — could move consumers to cut back their overall spending and also prevent the Federal Reserve from lowering interest rates further in the coming months. The Labor Department said Thursday its consumer price index rose 0.3% in October on high energy and foods costs, in line with September's increase and analysts' forecast.
A lackluster forecast from J.C. Penney also stirred some concern about the health of consumers as did downbeat comments from Wells Fargo.
Robert A. Dye, senior economist at PNC Financial Services, is concerned that readings on consumer prices and Wednesday's report on producer prices indicate the economy could start to feel pressure in coming months from higher energy costs as well as a weakening dollar.
"This number tells us that we might be concerned that the Fed might not have the leeway we thought it had a few months ago to ease the fed funds rate," he said, referring to the CPI report and the Fed's efforts to keep inflation in check.
The Dow Jones industrial average declined 120.96, or 0.91%, to 13,110.05. In the broader market, the Standard & Poor's 500 index fell 19.43, or 1.32%, to 1451.15, and the Nasdaq composite index fell 25.81, or 0.98%, to 2618.51.
Government bond prices rose. The yield on the 10-year Treasury note, which moves opposite its price, slid to 4.17% from 4.25% late Wednesday.
Oil prices slipped on the New York Mercantile Exchange, where a barrel of light, sweet crude fell 66 cents to $93.43. Gold prices fell as the dollar strengthened.
In other economic news, the number off workers filing for unemployment benefits rose 20,000 last week to 339,000, double what economists expected.
The Philadelphia Federal Reserve said regional manufacturing activity expanded in November at about the same "modest" pace seen in October. The bank's November business index rose to 8.2 from 6.8 in October.
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