US 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 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, the largest US bank, slid 5.4 percent, and those of rival Bank of America Corp, lost 3.2 percent. Credit card company American Express Co dropped 4.4 percent. Also increasing investors' concerns were comments late on Tuesday from Kansas City Fed President Thomas Hoenig, who said the US central bank must be ready to raise interest rates in a timely manner, given the "troublesome" inflation outlook.
The Dow Jones industrial average slid 206.48 points, or 1.59 percent, to 12,814.35. The Standard & Poor's 500 Index 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 a month.
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 slid 3.7 percent.
On the New York Mercantile Exchange, June crude 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 build-up in US 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 down 1.4 percent at $88.82 on the NYSE. Among consumer-oriented stocks, apparel retailer Gap Inc dropped 1.8 percent to $18.24 on the NYSE, while those of Home Depot Inc, the largest US home improvement retailer, slid 2.5 percent to $28.56. The S&P retail index fell 1.6 percent.
Shares of plane maker Boeing Co declined 1.4 percent to $84.55. Among homebuilders, shares of luxury homebuilder Toll Brothers dropped 4.6 percent to $23.86 on the NYSE. The Dow Jones home construction index slid 4.3 percent. On the Nasdaq, Apple Inc, 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 - 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.
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.