Investors drove stocks lower, brushing off a government report that showed little evidence of rising inflation. The dollar's weakness against the Japanese yen continued to undercut stocks.
The Dow Jones industrial average fell 108.91 points, or 1 percent, to close at 10,801.42. The index had tumbled from an early gain of 103 points, with the sell-off gaining momentum in the final hour of trading.
Broader stock indicators also closed lower. The Standard & Poor's 500 fell 18.32, to 1317.97. The technology-heavy Nasdaq composite index fell 54.12, to 2814.17, more than reversing Tuesday's gains.
"Despite the fact that we're still hitting new records with some regularity, the broad market is not participating," said Brian G. Belski, chief investment strategist at George K. Baum & Co. in Kansas City, Mo.
The Labor Department's report of a modest increase in its consumer price index--the most closely watched inflation gauge--initially pushed stocks higher today.
But it was not enough to convince investors that the Fed will hold off on raising interest rates for the third time this year as it tries to prevent inflation from escalating.
"Investors believe we've lost the wind at our backs in terms of low inflation and low interest rates," said Lynn Yturri, who runs the One Group Equity Income Fund for Banc One Investment Advisors.
The dollar's continued weakness in the dollar also drove the market lower.
In New York this afternoon, the dollar bought 104.68 yen, down from 105.88 yen late Tuesday. At one point earlier in the day, the dollar dropped to 103.20 yen, the lowest level against the Japanese currency since early 1996.
Investors fear a weaker dollar because it makes imports more expensive, setting the stage for a rise in inflation. It can also lead foreign investors to pull out of U.S. stocks to seek more attractive returns elsewhere.
The inflation-sensitive bond market swung sharply, with yields on 30-year Treasury bonds dropping to 6.08 percent after the release of the consumer price report, then shooting as high as Tuesday's late rate of 6.12 percent. Yields were 6.10 percent as stock markets closed for the day, with the price of the benchmark bond up $2.81 per $1,000 in face value.
Oracle fell 2-13/16, to 42 5/8, after the company's fiscal first-quarter earnings, reported after markets closed Tuesday, failed to meet the most optimistic predictions of Wall Street analysts. Oracle earned 16 cents per share, in line with published estimates but short of the "whisper" number, an unofficial forecast circulated among Wall Street traders.
A $10.66 billion merger inspired little enthusiasm on Wall Street. Cellular-phone maker Motorola fell 6-9/16, to 86 5/8, after saying it will acquire General Instrument, the leading maker of cable TV set-top boxes. Shares of General Instrument fell 3-29/128, to 47-35/128.
Microsoft fell 2 1/2, to 92-9/16, and Sun Microsystems 3, to 82 3/8.
Some analysts attributed the late slide in stocks to selling in advance of Friday's quarterly "triple witching" day, when options and futures on stocks and stock indexes expire.