Stocks off on consumer survey, earnings and inflation

The Reuters/University of Michigan consumer sentiment index came in at 62.6 for April, down from 69.5 a month earlier and the lowest reading since the early 1980s as Americans contended with rising energy and food prices. Consumers' flagging mood is worrisome for Wall Street because consumer spending accounts for about 70 percent of U.S. economic activity.

Microsoft said after the closing bell Thursday that worldwide sales next year should offset weakness in the U.S. economy. Still, investors appeared unimpressed by Microsoft's forecast for the current quarter and its revenue figures.

Oil prices, meanwhile, jumped on a series of troubling events overseas, including news that a ship under contract to the U.S. Navy fired warning shots on two Iranian boats. Oil was up earlier following an attack on a pipeline in Nigeria and a looming refinery strike in Scotland; light, sweet crude shot as high as $119.50 a barrel on the New York Mercantile Exchange before settling back to hover just below $119 a barrel.

Oil's advance raises the specter of higher inflation, which could be a further deterrent to consumer spending.

The market was also concerned about corporate news. Craig Hester, chief executive at Hester Capital Management in Austin, Texas, said stocks will likely fluctuate as investors digest the flood of corporate results from this week and next as well as ahead of the Federal Reserve's decision on interest rates next week.

"The big risks I see for stocks right now are earnings," he said, adding that next week should help give investors a better idea bout the state of the economy with reports due on the nation's gross domestic product and employment.

In late morning trading, the Dow fell 72.46, or 0.56 percent, to 12,776.49 after earlier being down more than 100 points.

Broader stock indicators fell. The Standard & Poor's 500 index declined 4.29, or 0.31 percent, to 1,384.53, and the Nasdaq composite index fell 29.52, or 1.22 percent, to 2,399.40.

Declining issues outnumbered advancers by about 3 to 2 on the New York Stock Exchange, where volume came to 506.09 million shares.