US stocks slid yesterday after oil prices jumped above US$129 a barrel and a key inflation gauge rose more than expected, adding to mounting concerns about US consumers' discretionary spending power.
Weak quarterly results and outlooks from discount retailer Target Corp and home improvement chain Home Depot Inc further underscored how consumers are struggling as gasoline prices soar and the value of their homes drops.
Bank shares were the biggest drags on the S&P 500 and the Dow, after an influential analyst warned that the credit crisis was far from over.
The tone was set early in the session, after the US producer price index, excluding volatile food and energy costs, rose 0.4 percent last month. The rise for the year through April was the largest since 1991.
"The pullback on some concerns about inflation and higher oil is not all that surprising after last week's gains," said Richard Sparks, senior equities analyst at Schaeffer's Investment Research in Cincinnati.
The Dow Jones industrial average slid 223.09 points, or 1.71 percent, to 12,805.07. The Standard & Poor's 500 Index was down 14.64 points, or 1.03 percent, at 1,411.99, while the Nasdaq Composite Index was down 28.33 points, or 1.13 percent, at 2,487.76.
JPMorgan, the No. 3 US bank, dropped 4.8 percent to US$43.78 on the New York Stock Exchange, while shares of Citigroup Inc, the largest US bank, declined 3.9 percent to US$22.08.
Meredith Whitney, banking analyst at Oppenheimer & Co, said the credit crisis will result in three years of multibillion-dollar revenue declines for banks.
Technology shares also took a heavy beating. Chipmaker Intel Corp was down more than 3 percent a day after data-storage memory chip maker SanDisk Corp warned higher oil prices will hurt consumer spending on technology.
Intel dropped to US$24.10, putting the stock among the top drags. SanDisk shares tumbled 3.6 percent to US$28.95.
Shares of Home Depot, the largest US home improvement chain, fell 6 percent to US$27.12 after the retailer posted a 66 percent slide in quarterly profit.
Target fell 0.8 percent to US$54.48 after it said its sales growth will likely remain sluggish until the US economic environment improves or stabilizes.
The only two companies escaping the sell-off on the Dow industrials were Chevron Corp and Exxon Mobil, which benefited from the latest record high in oil prices.