NEW YORK -- U.S. stocks surrendered all of Wednesday's gains and more as investors brushed aside General Motors Corp.'s fourth-quarter earnings to focus on the prospect of rising interest rates.
Today's producer price report is expected to show that wholesale inflation increased in January at the fastest pace since last April, according to a survey of economists by Bloomberg Business News.
Stocks also were depressed by comments from Lehman Bros. analyst Elaine Garzarelli, a longtime bull on U.S. stocks, traders said.
Ms. Garzarelli, who is credited with predicting the 1987 market crash, repeated her view that stocks normally fall about 4 percent to 7 percent in response to an initial increase in interest rates by the Federal Reserve, such as the one made last Friday.
Tepid investor response to GM's earnings "set the tone for a down day," said Robert Stovall, president of Stovall/Twenty-First Advisers.
The Dow Jones Industrial Average tumbled 36.58, to 3,895.34, more than forfeiting Wednesday's 25.89-point gain. Caterpillar Inc., General Electric Co. and GM led the retreat.
The Standard & Poor's 500 Index slid 3.84, to 468.93, after rising 1.72 Wednesday. The Nasdaq Composite Index closed 3.12 lower, at 783.41, after a gain of 3.84 Wednesday. The American Stock Exchange Market Value Index shed 1.46, to 479.13.
The Dow Jones Transportation Average slid 19.20, to 1,815.50.
Concern about rising interest rates has intensified since the Fed moved last Friday to raise interest rates to ward off inflation as the economy recovers. Rising rates cause concern for stock investors partly because they tend to make fixed-income investments more attractive.
The target for the fed funds rate -- what banks charge each other on overnight loans -- rose last Friday to a perceived 3.25 percent from 3 percent. The discount rate remains at 3 percent.
The Dow Jones Utilities Average, which tends to fall on expectations of higher interest rates, tumbled 3.56, to 215.40, closing below its 52-week low of 217.11, set Jan. 24. Yesterday's finish marked the lowest close since Nov. 10, 1992, when the average closed at 215.56.
The utilities average has now fallen 16 percent from its record closing high of 256.46, set Sept. 13, 1993. That was one month before the yield on the 30-year Treasury bond fell to a record low 5.77 percent.
"A lot of people got concerned that we didn't hold" the low on the utilities average, said Dale Tills, manager of institutional equities trading at Charles Schwab & Co. in San Francisco. "We just broke through that like crazy."
Low interest rates have prompted investors to transfer billions of dollars from bank deposits into stocks over the past few years, and the concern is that rising rates will disrupt the bull market, traders said.
"People are now starting to factor into their equation another increase in rates sometime before June," said Mike Rocco, an analyst at Philadelphia Investment Management Group, which manages about $250 million of assets.
Compounding the concern about rates were remarks made by Lehman's Ms. Garzarelli, traders said.
Investors grew concerned even though Ms. Garzarelli also repeated her view that the three-month Treasury bill rate would have to rise to about 3.7 percent for stocks to fall 10 percent or more. The three-month T-bill rate currently stands at about 3.35 percent.
Automakers, among the market's biggest winners in recent sessions, retreated the most, followed by electric utilities.
GM fell $1.625, to $62.625; Ford Motor Co. dropped $2.50, to $66; and Chrysler Corp. slumped $1.625, to $59.75. All three stocks set all-time highs, adjusted for stock splits, in the past month.
Auto stocks slumped even though Ford's fourth-quarter earnings, released Wednesday, were in line with analysts' expectations, and GM yesterday released profits that exceeded most analysts' forecasts.
"I suspect people that bought these stocks for a lot cheaper than where they are now sold" to cash in on the stocks' rally, said William Lord, vice president of equity trading at UBS Securities. "People have been using these big industrial companies' earnings as a chance to sell the stock."
Caterpillar, for example, closed down $2.75, to $106.125, from an all-time high of $109.375 in earlier trading yesterday.