Stocks fell sharply yesterday as a number of companies warned of profit shortfalls and higher costs, some of which could be passed along...

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NEW YORK — Stocks fell sharply yesterday 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 Dow Jones industrial average fell 94.37 to 10,441.11.

Microsoft, one of the 30 Dow stocks, slid 52 cents to close at $24.98 a share. Boeing, also a Dow stock, gained 81 cents to $67.95.

Broader stock indicators also moved substantially lower. The Standard & Poor’s 500 index lost 12.23 to 1,214.47, and the Nasdaq composite index dropped 16.07 to 2,139.36.

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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’s stock was downgraded due to higher raw-material prices, and Clorox 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.

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.

“You’re seeing the fast money shift around a bit, and short-term, that’s good for stocks,” said Ken Tower, chief market strategist for Schwab’s CyberTrader. “Longer-term, you have to consider that, at some point, energy prices are going to catch up to the economy and the market.”

The latest Commerce Department report on factory orders failed to prop up stocks, even though factory orders surged 2.5 percent in August, compared to a 2.5 percent drop in orders in July. Those figures did not include the impact of hurricanes Rita and Katrina and the subsequent jumps in energy and raw-material costs.

Higher energy prices prompted Clorox to slash its profit outlook for the second quarter as well as the full fiscal year. The household-products maker also announced a price increase for about 40 percent of its product portfolio to offset those higher costs. Clorox dropped 77 cents to $53.81.

Procter & Gamble was downgraded to “hold” from “buy” at JP Morgan Securities due to concerns over higher raw-material prices, which were blamed in part on energy costs. P&G shares lost $1.23 to $58.08.