US stocks drop sharply

Stocks fell sharply today as a number of companies warned of profit shortfalls and higher costs, some of which could be passed on to consumers.

Concerns over interest rates also pressured stocks after a Federal Reserve official signalled more increases for the future.

The markets were higher in the early part of the session as investors welcomed a decline in crude oil futures, prompted by news that the government could release heating oil reserves to help combat higher heating costs as winter approaches.

A barrel of light crude settled at 63.90 dollars, down 1.57 dollars, on the New York Mercantile Exchange.

Yet the spectre of inflation quickly overcame any advances. Procter & Gamble Co.’s stock was downgraded due to higher raw material prices, and Clorox Co. blamed high energy costs for an expected earnings shortfall and increases in the retail prices of its products, which could exacerbate Wall Street’s inflation fears.

Inflation concerns were heightened as Dallas Federal Reserve Bank President Robert Fisher said inflation was nearing the high end of the Fed’s comfort zone - a clear signal that the Fed will continue raising interest rates.

The Dow Jones industrial average fell 94.37, or 0.9 percent, to 10,441.11.

Broader stock indicators also moved substantially lower. The Standard & Poor’s 500 index lost 12.23, or 1%, to 1,214.47, and the Nasdaq composite index dropped 16.07, or 0.75%, to 2,139.36.