Wall Street wigged out about inflation and energy prices today, worrying that fuel costs will fire up inflation and water down corporate profits, taking a bigger toll on the economy than previously realized.
Energy prices continued to fall today, but Wall Street now fears that they will not come down enough to avoid economic damage.
Stock traders also heard a sell signal in a speech given by the President of the Federal Reserve Bank of Dallas, Richard Fisher, who warned that inflation is "near the upper end of the Fed's tolerance zone."
Fisher is a member of the Fed's Open Market Committee, which sets interest rates. His remarks were interpreted as meaning the Fed will keep steadily boosting interest rates for the foreseeable future.
Stock investors don't like higher interest rates to begin with and they also don't like to see profits eroded by inflated energy costs.
The double whammy was evident in a warning from Chlorox Co. that it will raise prices on half its products because of higher energy costs--and still doesn't expect to make as much money as previously forecast.
Proctor & Gamble Co., another big name in the supermarket aisles, is facing the same squeeze analysts warned, driving down P&G stock, which was one of the biggest losers in the Dow Jones industrial average.
Falling for the second day in a row, the Dow dropped 94 points to 10,441.11. The Nasdaq Stock Market composite index fell 16 points to 2,139.36. The Standard & Poor's 500 stock index lost 12 points, closing at 1,214.47.