US stocks fall on inflation worries

Wall Street retreated sharply today as investors glumly absorbed a spike in oil prices and comments from two Federal Reserve officials that unexpected economic growth could prompt an interest-rate hike.

Stocks had spent most of the session in positive territory after yesterday’s pullback made for fertile ground for bargain-hunters. The market also got a lift from analyst upgrades of the automobile sector, which sent Ford Motor Co. and General Motors Corp. higher.

Investors began to sell after St Louis Fed President William Poole and Dallas Fed President Richard Fisher both warned rates will go higher if inflation doesn’t ebb.

Wall Street has been looking for any clues about how central bankers are viewing the economy and what way it might lead on interest rates this year.

Investors also digested a handful of earnings reports and watched the movements of crude oil, which crossed $60 per barrel for the first time since early January. Crude prices flirted with that psychological barrier for three straight days this week, only to retreat.

“I do think that, in order for this market to continue to rally, we’re going to need further confirmation of an economy that’s growing and the risks of inflation have abated,” said Peter Cardillo, chief market economist for Avalon Partners.

The Dow Jones industrial average fell 56.80, or 0.45%, at 12,580.83 after also pulling back yesterday amid concerns about the housing market.

Broader stock indicators also fell. The Standard & Poor’s 500 index fell 10.25, or 0.71%, to 1,438.06, and the Nasdaq composite index was down 28.85, or 1.16%, at 2,459.82.