Stocks tumbled after Wal-Mart said higher gasoline prices curbed customer spending. The news sent many retail stocks lower, while government...

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NEW YORK — Stocks tumbled after Wal-Mart said higher gasoline prices curbed customer spending. The news sent many retail stocks lower, while government data showing a larger-than-expected jump in inflation also dampened investor enthusiasm.

The Dow Jones industrial average dropped 120.93 to 10,513.45.

Microsoft, one of the 30 Dow stocks, dropped 39 cents to close at $26.74 a share. Boeing, also a Dow stock, fell $1.19 to $66.27.

The Standard & Poor’s 500 index fell 14.53 to 1,219.34, its biggest point drop in almost four months, and the Nasdaq composite index slid 29.98 to 2,137.06.

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Wall Street is facing increasing evidence that high energy prices, spurred by record crude-oil futures, are nipping consumer spending.

Wal-Mart’s stock drooped after the company blamed lower quarterly revenues on higher gasoline prices. Shares of other retailers, including Target, Home Depot and Limited Brands dropped as well.

“We are starting to see the bite from some of the risks that have been lurking in the background, like oil,” said Hans Olsen, managing director and chief investment officer at Bingham Legg Advisers. “I think it’s going to continue to be tougher for this market to do anything positive.”

Investors also fretted over the latest reading of the Labor Department’s Consumer Price Index, which rose 0.5 percent last month — the biggest increase in three months and larger than the 0.4 percent increase economists had expected. With food and energy prices removed, “core” CPI rose 0.1 percent.

Bonds rose sharply as stocks moved lower, with the yield on the 10-year Treasury note falling to 4.21 percent from 4.28 percent late Monday. The dollar was up against the euro and gold prices fell.

Crude-oil futures traded in a narrow range but remained in the mid-$60 range — high enough to keep gasoline and heating oil prices near record levels.

A barrel of light crude was quoted at $66.08, down 19 cents, on the New York Mercantile Exchange.

In one of the few bright spots of the session, investors welcomed the Commerce Department’s report on home construction.

The number of housing projects started fell slightly last month to an annualized 2.042 million units, but housing permits issued reached a 21-year high.

Yet the retail sector sputtered.

While Wal-Mart’s earnings beat Wall Street’s profit forecasts by 2 cents per share, the company warned that its third-quarter earnings would be lower than expected. Wal-Mart fell $1.53 to $47.57.

Fellow Dow industrial Home Depot fell 94 cents to $40.67 despite reporting a 14 percent jump in quarterly profits that beat Wall Street’s expectations by 3 cents per share on strong revenues.

Ed Peters, chief investment officer at PanAgora Asset Management called the news from retailers “potentially troublesome.”

Other retail and consumer stocks dropped, including Target, which fell $1.44 to $55.71, Limited, which fell 84 cents to $23.35 and Starbucks, which fell $1.15 to $51.09.