NEW YORK -- U.S. stocks tumbled yesterday as interest rates climbed amid concern that rising commodity prices will push up inflation.
The retreat echoed declines in the bond market after the Philadelphia Federal Reserve Bank said raw-material prices rose its area for the second straight month. That sent long-term interest rates, as reflected in the benchmark 30-year Treasury bond, to 6.54 percent, the highest since Aug. 4, and up from 6.46 percent Wednesday.
The Dow Jones industrial average fell 14.63, to 3,922.64, after dropping as low as 3,906.60, driven by losses in International Business Machines Co., Minnesota Mining & Manufacturing Co. and Philip Morris Cos.
The Standard & Poor's 500 Index slid 2.45, to 470.34, after falling to 468.44, fueled by losses in telephone, financial, tobacco and TC auto stocks. The Nasdaq Combined Index fell 2.38, to 790.24, as Snapple Beverage Corp., Intel Corp. and Tele-Communications Inc. declined.
Almost 11 stocks fell for every seven that advanced on the New York Stock Exchange, where 338.9 million shares changed hands, up from 295.4 million Wednesday.
Comments by Laura D'Andrea Tyson, chairman of the President's Council of Economic Advisors, that fourth-quarter economic growth may be revised up from the reported annual rate of 5.9 percent, "flipped the bond market" later in the afternoon, said Dan Marciano, senior vice president in equity trading at Dillon, Read & Co.
Earlier in the day, yields on 30-year Treasury bonds had fallen as low as 6.39 percent, after the Labor Department said the prices consumers pay for goods and services were unchanged in January. Economists had expected prices would show a 0.3 percent gain.
Although the report looked "superficially good," Brown Bros.' Ms. Callies said, investors are concerned that rising raw-material prices will eventually feed into broader consumer inflation.
The Philadelphia Fed's monthly report on manufacturing conditions said an index of wholesale prices rose in February to its highest point since late 1990 and that almost 44 percent of companies expect further gains in the next six months.
Last week, the government said producer prices, excluding food and energy, rose by 0.4 percent in January, slightly stronger than economists' forecast of a 0.3 percent gain.
Stocks got a brief boost from Germany's decision to lower its key discount rate to 5.25 percent from 5.75 percent. Lower rates will help pull Germany out of a recession and let other European countries ease credit policy as well, said Peter DaPuzzo, senior managing director at Cantor, Fitzgerald & Co. Improvements in Europe's economy stimulate demand for U.S. exports.
The most active U.S. stocks were U.S. Surgical Corp., Lotus Development Corp., Intel Corp., Best Power Technology Inc. and Novell Inc.
U.S. Surgical Corp. slid $2.75, to $18.75. On Wednesday, federal jury ruled its patent on a medical device was invalid.
Lotus Development Corp. climbed $6.50, to $66.50.