Stocks tumbled Tuesday as a troubling reading on wholesale inflation underscored the drag of high energy prices on the economy. The Dow Jones industrial...

Share story

NEW YORK — Stocks tumbled Tuesday as a troubling reading on wholesale inflation underscored the drag of high energy prices on the economy.

The Dow Jones industrial average fell 108.78 to 12,160.30, with the index’s financial stocks performing weakest.

Microsoft, one of the 30 Dow stocks, slipped 13 cents to close at $28.80. Boeing, also a Dow stock, fell 64 cents to $74.38.

Broader stock indicators also declined. The Standard & Poor’s 500 index fell 9.21 to 1,350.93, while the Nasdaq composite index fell 17.05 to 2,457.73.

Tuesday’s economic data illustrated how the steep run-up in energy costs this year is affecting businesses. The Labor Department said its index of producer prices jumped 1.4 percent in May, the largest increase since November.

The core Producer Price Index, which strips out often volatile food and energy prices, rose a mild 0.2 percent. But Wall Street remains concerned that companies are having to swallow ballooning costs — and may soon have to pass them on to already strapped customers.

Although crude oil dipped to about $134 a barrel Tuesday on the New York Mercantile Exchange, it remains near record levels.

Subodh Kumar, a Toronto global investment strategist, said inflation concerns are weighing on stocks as investors try to readjust their models to factor in energy prices staying high.

The price of oil has doubled in the past year, prompting some investors to call it a bubble. But others say a pullback would only lessen, not eliminate, the pricing pressure.

“The market and bonds are recalibrating themselves lower because of inflation,” Kumar said.

Meanwhile, Goldman Sachs — despite a tamer-than-expected 11 percent decline in quarterly profit — aggravated jitters by releasing a downbeat report on the banking industry.

“We’re back in the mode where people are guessing how many more billions of financial institution write-offs there are going to be. … That, and what’s going to happen with inflation,” said Scott Wren, equity strategist for Wachovia Securities.