US stocks fell on Thursday as oil prices increased sharply and Treasury bond yields rose, while same-store retail sales for February disappointed the market.
Concern that benchmark interest rates may rise further drove bond yields higher, prompting investors to sell bank stocks like Citigroup Inc and J.P. Morgan Chase & Co Rising interest rates raise banks' borrowing costs and make it more difficult for them to make money on loans.
On the corporate front, the stock of Google Inc rose 3.2 percent to $376.45 and limited the Nasdaq's decline. The Web search company signalled it aims to become a $100 billion revenue company and said it plans to put systems in place to help reach that scale during 2006.
"There's uncertainty about the Fed, there's uncertainty about how the economy is performing and on top of that, we had oil prices climbing up again, which only benefits energy stocks," said Evan Olsen, head of equity trading at Stephens Inc "Stocks came off their lows, helped by the energy sector, but the breadth today was negative, especially after the retail sales report.
The Dow Jones industrial average was down 28.02 points, or 0.25 percent, at 11,025.51. The Standard & Poor's 500 Index was down 2.10 points, or 0.16 percent, at 1,289.14. The Nasdaq Composite Index was down 3.53 points, or 0.15 percent, at 2,311.11.
The yield of the US Treasury 10-year note climbed to a three-month high after the European Central Bank raised interest rates and its chief expressed concern about a pickup in inflation, which signaled more increases may be in store.
Energy supply threats pushed the price of crude oil up 2 percent, which stirred concerns that higher energy costs could reduce corporate profits and curb consumer spending.
"Stocks in the financial and consumer discretionary sectors look particularly vulnerable as the perception is that inflationary pressures will keep mounting and the Fed is not done with raising rates," said David Joy, chief market strategist at RiverSource Investments in Minneapolis, with $400 billion in assets.
The stock of Procter & Gamble Co, the huge consumer products company that makes Tide detergent, Crest toothpaste and a host of other household items, was down 0.9 percent, or 56 cents, at $59.55 on the New York Stock Exchange. P&G was among the heaviest weights on the Dow industrials.
Shares of Citigroup, a Dow component and the largest US financial services company, were the biggest drag on the S&P 500. Citigroup was down 1 percent, or 48 cents, at $46.05 on the NYSE.
Adding to the market's concerns about geopolitical turmoil was the news that a suspected suicide car bomb attack outside the US consulate in Karachi killed an American and at least three other people on Thursday.
Most integrated oil and gas companies in the S&P 500 rose, helped by the increase in oil prices. ConocoPhillips was up 1.6 percent, or $1.01, at $62.78 and Exxon Mobil Corp, a Dow component, gained almost 1 percent, or 51 cents, to $60.85. Exxon's advance curbed the declines in both the Dow industrials and the S&P 500.
Trading was heavy on the NYSE with about 1.79 billion shares being exchanged, above last year's daily average of 1.62 billion shares. On Nasdaq, 2.09 billion shares were traded, also above last year's 1.80 billion average.
About 5 shares fell for every 4 stocks that rose on the NYSE. On Nasdaq, declining stocks oupaced gainers by a 4 to 3 ratio.
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