U.S. Stocks Drop as Inflation Tops Forecasts; Amazon, EBay Fall

U.S. stocks fell, heading for their steepest weekly drop in more than a month, after accelerating inflation raised concern higher prices will slow economic growth.

Merrill Lynch & Co. slid on a CNBC report that writedowns at the third-biggest U.S. securities firm may increase by as much as $6 billion. Black & Decker Corp. declined the most in five months after the largest U.S. power-tool maker cut profit forecasts. Amazon.com Inc. and EBay Inc. retreated after Internet research firm ComScore Inc. said holiday online sales grew at the slowest pace ever.

The Standard and Poor's 500 Index declined 8.24, or 0.6 percent, to 1,480.17 at 12:54 p.m. in New York. The Dow Jones Industrial Average slid 82.1, or 0.6 percent, to 13,435.86. The Nasdaq Composite Index lost 14.32, or 0.5 percent, to 2,654.17. About three stocks dropped for every one that rose on the New York Stock Exchange. Benchmarks in Asia fell, while most European indexes rose.

The markets will have some indigestion with this inflation number, said Michael Strauss, who helps oversee about $43 billion as market strategist and chief economist at Commonfund in Wilton, Connecticut. Consumers are recognizing they really have to hunker down as they see their heating oil costs and their gasoline costs.

The consumer price index climbed 0.8 percent in November, the most since September 2005, the Labor Department said. Prices excluding food and energy rose 0.3 percent, also more than forecast.

Dollar Surges

The dollar advanced the most against the euro since May 2005 on speculation the Federal Reserve won't cut interest rates again. Odds that the Fed will hold its benchmark lending rate at 4.25 percent at its January meeting rose to 22 percent after the report, up from no chance since the last quarter-point rate-cut on Dec. 12.

Black & Decker slumped $5.65, or 7.1 percent, to $74.48. The largest U.S. power-tool maker said it expects fourth-quarter profit excluding some items to be $1.03 a share. The tool maker had previously predicted earnings of at least $1.55 a share.

Retail stores lost 1.6 percent for the steepest decline among 24 industry groups in the S&P 500. Amazon.com, the biggest online bookstore, fell $2.29 to $90.11. EBay, the largest Internet auctioneer, dropped $1.16 to $32.93.

Internet sales from Nov. 1 through Dec. 11 increased 19 percent to $20.5 billion, Reston, Virginia-based ComScore said. Online sales in November and December may rise 20 percent, a record low for the industry, and slower than the 26 percent pace a year earlier.

'Getting Hit'

U.S. retailers may report the slowest sales growth since 2002 this year as higher fuel and food costs discourage spending during the holiday season, the National Retail Federation said.

The consumer is getting hit by higher energy prices and given the state of the overall housing market, we're expecting consumers to pull in their spending, said Rose Grant, who helps manage about $2 billion at Eastern Investment Advisors in Boston. We don't think consumer spending will be as strong as in past quarters.

Merrill Lynch lost 72 cents to $57.11. S&P 500 financial stocks slipped 0.8 percent.

Goldman Sachs Group Inc. added $3.71, or 1.8 percent, to $212.19. The world's biggest securities firm may post record full-year profit of more than $11 billion on Dec. 18, boosted by $4 billion from bets on subprime mortgage-related lending, the Wall Street Journal reported, citing analysts.

The gains by a few traders who speculated that subprime securities would lose value helped to compensate for $1.5 billion to $2 billion of losses elsewhere, the newspaper said. A Goldman spokesman declined to comment, according to the Journal.

BioMarin Pharmaceutical Inc. had its steepest gain since 2003, climbing $6.81, or 23 percent, to $36.57. The maker of treatments for rare disorders won approval from U.S. regulators to market a pill for a childhood disease that can cause mental retardation.

Source - Bloomberg