(Adds three paragraphs at the end, with News Corp's results
after the bell, plus volume and advance/decline figures)
By Ellis Mnyandu
NEW YORK, May 7 (Reuters) - U.S. stocks tumbled on
Wednesday, on concerns about inflation and higher interest
rates as oil jumped to a record above $123 a barrel.
Investors sold off shares of banks, home builders and
companies dependent on consumer spending amid fears that
rising prices will crimp demand and exacerbate fallout from
the housing slump.
American International Group Inc <AIG.N> dragged the Dow
and S&P 500 lower after the insurer's stock fell nearly 7
percent a day before it was expected to report a second
straight quarterly loss due to its exposure to toxic mortgage
investments.
Shares of Citigroup Inc <C.N>, the largest U.S. bank, slid
5.4 percent, and those of rival Bank of America Corp <BAC.N>,
lost 3.2 percent. Credit card company American Express Co
<AXP.N> dropped 4.4 percent.
Also increasing investors' concerns were comments late on
Tuesday from Kansas City Fed President Thomas Hoenig, who said
the U.S. central bank must be ready to raise interest rates in
a timely manner, given the "troublesome" inflation outlook.
"Inflation is definitely a worry because the Fed doesn't
have that much to fight inflation except by raising interest
rates, and if the economy is not growing the way they want,
raising interest rates all adds up to a difficult
environment," said Alan Lancz, president of Alan B. Lancz &
Associates Inc, an investment advisory firm, based in Toledo,
Ohio.
"Already you've got consumer confidence at record lows,
about 20-year lows, so basically as energy prices go up
practically every week, that's not going to help the way
people feel about their pocketbook."
The Dow Jones industrial average <> slid 206.48
points, or 1.59 percent, to 12,814.35. The Standard & Poor's
500 Index <.SPX> fell 25.69 points, or 1.81 percent, to
1,392.57. The Nasdaq Composite Index <> lost 44.82
points, or 1.80 percent, to 2,438.49.
The session's losses marked the broader market's worst
slide in nearly amonth.
AIG shares dropped to $45.08 on the New York Stock
Exchange, where Citigroup shares ended at $24.48, and those of
Bank of America fell to $38. Shares of American Express were
the second-biggest drag on the Dow, ending down at $48.70.
The S&P financial index <.GSPF> slid 3.7 percent.
On the New York Mercantile Exchange, June crude <CLM8>
jumped $1.69, or 1.39 percent, to settle at a record $123.53 a
barrel, after climbing to $123.80, a new intraday peak. The
runup occurred despite data showing a larger-than-expected
buildup in U.S. crude oil inventories last week.
And as shares of energy companies had risen along with oil
prices in recent sessions, investors opted to lock in profits
in the energy sector, sending shares of Exxon Mobil Corp
<XOM.N> down 1.4 percent at $88.82 on the NYSE.
Among consumer-oriented stocks, apparel retailer Gap Inc
<GPS.N> dropped 1.8 percent to $18.24 on the NYSE, while those
of Home Depot Inc <HD.N>, the largest U.S. home improvement
retailer, slid 2.5 percent to $28.56. The S&P retail index
fell 1.6 percent.
Investors also pummelled shares of big manufacturers,
heavily reliant on energy, including heavy equipment maker
Caterpillar Inc <CAT.N>, whose shares dropped almost 2 percent
to $81.63.
Shares of plane maker Boeing Co <BA.N> declined 1.4
percent to $84.55.
Among home builders, shares of luxury home builder Toll
Brothers <TOL.N> dropped 4.6 percent to $23.86 on the NYSE.
The Dow Jones home construction index <.DJUSHB> slid 4.3
percent.
On the Nasdaq, Apple Inc <APPL.O>, the maker of the iPod,
was the top drag, ending down 2.2 percent at $182.59.
After the closing bell, Rupert Murdoch's News Corp
<NWSa.N> -- whose media holdings include the Fox TV network
and Dow Jones, publisher of The Wall Street Journal -- posted
a three-fold rise in quarterly profit and its shares gained
almost 2 percent to $18.72 from an NYSE close of $18.42. For
details, see []
Volume was light on the New York Stock Exchange, where
about 1.28 billion shares changed hands, below last year's
estimated daily average of 1.90 billion. On the Nasdaq, about
2.29 billion shares traded, above last year's daily average of
2.17 billion.
Decliners outnumbered advancers by a ratio of about 5 to 2
on both the Nasdaq and the NYSE.
(Reporting by Ellis Mnyandu; Editing by Jan Paschal)
