Stocks lost ground for a second straight session Friday when the dollar weakened and bonds prices fell after data showing higher import prices stoked the market's inflation worries.
Investors were unsettled by the Labor Department's report on import and export prices, which showed that prices for imported goods swelled 2.1 percent in April after declining 0.2 percent the previous month. But excluding volatile energy costs, import prices were flat versus a 0.3 percent drop in March.
A sharp drop in consumer confidence spurred fears of high gasoline prices choking consumer spending. Meanwhile, Wall Street weighed the importance of an unexpected decline in the trade deficit and cooling oil prices.
Friday's decline in equity markets built on steep losses the previous day, when surging commodities prices compounded anxiety that the Federal Reserve could continue its two-year streak of interest rate hikes. Investors will be searching for hints of inflation in next week's reports on wholesale and consumer prices.
I certainly get the sense that it's going to be hard to rally, said Art Hogan, chief market analyst for Jefferies & Co. We're going to take it for what it is and come back next week fighting. There will be plenty for us to think about in terms of the pace of economic growth.
In midday trading, the Dow Jones industrial average lost 41.70, or 0.36 percent, to 11,459.03. The Dow sank almost 142 points in Thursday's session, its biggest single-day drop since falling 213 points on Jan. 19.
Broader stock indicators also retreated. The Standard & Poor's 500 index was down 6.03, or 0.46 percent, at 1,299.89, and the Nasdaq composite index dropped 15.05, or 0.66 percent, to 2,257.65.
Bonds continued sliding, with the yield on the 10-year Treasury note rising to 5.19 percent from 5.16 percent late Thursday. The interest rate debate also weighed on the dollar, which fell further against the yen. Gold prices fluctuated near $720 an ounce.
Lowered forecasts for global oil demand from the International Energy Agency eased pressure on the energy market. A barrel of light crude fell 97 cents to $72.35 on the New York Mercantile Exchange.
The Labor Department said prices for goods shipped from the United States rose 0.6 percent in April after gaining 0.2 percent in the prior month. Elsewhere, the Commerce Department said the trade deficit narrowed by $3.6 billion to $62 billion. Economists were predicting a $1.4 billion increase.
The University of Michigan's consumer-sentiment index for May plummeted 8.4 points to 79. Economists were looking for the index to drop just 1.4 points to 86.
Expedia Inc. plunged $4.81 to $14.85 after its first-quarter profit declined and fell far short of Wall Street expectations. The online travel company said higher costs outpaced a modest jump in revenue.
Electronics retailer Best Buy Co. is paying $180 million to acquire a majority stake in Jiangsu Five Star Appliance Co., China's fourth-largest appliance and electronics seller. Best Buy tumbled 81 cents to $53.01.
General Motors Corp. was one of the few advancers among the Dow Jones industrials, adding 66 cents to $26.47 after KeyBanc Capital Markets upgraded the automaker to buy on beliefs that negotiations with its union will be successful.
Declining issues led advancers by almost 4 to 1 on the New York Stock Exchange, where volume of 557.9 million shares topped the 501.4 million shares changing hands at the same point Thursday.
The Russell 2000 index of smaller companies slid 10.63, or 1.4 percent, to 746.84.
Overseas, Japan's Nikkei stock average tumbled 1.54 percent. Britain's FTSE 100 plunged 2.15 percent, Germany's DAX index sank 2.29 percent and France's CAC-40 was lower by 2.14 percent.
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