NEW YORK (CNN/Money) -
Stocks slumped Tuesday, as the biggest jump in wholesale prices in nearly 15 years sparked inflation fears, unnerving a market already vulnerable to profit taking after a three-week run.
The Dow Jones industrial average (down 62.59 to 10,487.65, Charts) lost 0.6 percent and the broader Standard & Poor's 500 (down 8.38 to 1,175.43, Charts) index fell about 0.7 percent. The Nasdaq composite (down 15.47 to 2,078.62, Charts) index also lost about 0.7 percent.
Hewlett-Packard's upbeat earnings and forecast after the bell looked to give the techs a leg up Wednesday. However that could change depending on how investors react to Wednesday's consumer price index (CPI), the government's most widely-watched measure of inflation.
"The HP news is clearly positive, particularly for technology," said Paul Mendelsohn, chief investment strategist at Windham Financial Services, "and if nothing negative happens overnight, you could have a higher open. But we have CPI tomorrow, and that's a big unknown."
After the close of trade, Hewlett-Packard (up $0.24 to $19.68, Research) reported earnings of 41 cents per share, up from 36 cents a year ago and 4 cents more than expected. Revenue also rose and surpassed estimates. Fiscal year 2005 guidance was mostly in line.
The stock initially jumped more than 9 percent in after-hours trading, before giving back a little. It was trading up around 6.5 percent by 6:30 p.m. ET.
Due before the open Wednesday, CPI likely rose 0.4 percent in October, according to economists surveyed by Briefing.com, after rising 0.2 percent in September. The "core" CPI is expected to have risen 0.1 percent after having risen 0.3 percent in September.
Wednesday also brings reports on the housing market. October housing starts are expected to have risen to a 1.960 million unit annual rate from a 1.898 million unit annual rate in September. Building permits are expected to have risen to a 2 million unit rate in October from a read of 1.998 million units in September.
Industrial production is expected to have risen 0.4 percent in October, in a report also due early Wednesday, after rising 0.1 percent in September. Capacity utilization is expected to rise to 77.4 percent from 77.2 percent in September.
Also due before the open, earnings from Applied Materials (Research). The chip gear maker is expected to have earned 26 cents per share, two cents short of a year ago.
Tuesday's market
The government's producer price index (PPI), a measure of wholesale inflation, jumped 1.7 percent in October, driven by soaring energy prices. It was the biggest gain since January 1990 and came in well above even the highest forecasts on Wall Street.
While crude oil prices have been sliding in recent weeks, generally higher prices are making investors nervous about the economy and corporate earnings. Worries about how this might play out sparked the sell off Tuesday, analysts said.
The "core" PPI, which excludes volatile food and energy prices, rose 0.3 percent in October after a 0.3 percent climb in September. Economists, on average, thought it would rise 0.1 percent.
Falling oil prices helped the major gauges cut their losses by the close, but did little to reverse the general market direction.
"I think the reason the market has been up the last three weeks is relief that we got through the election and that oil prices have started" falling, said Art Hogan, chief market analyst at Jefferies & Co.
"That relief is still in place," he added. "I think in the short term we're overbought, but I wouldn't bet against this market going higher into the end of the year."
What moved?
Declines were broad-based, with 24 of 30 Dow stocks falling.
In corporate news, Home Depot reported earnings of 60 cents a share early Tuesday, up from 50 cents a year earlier and 3 cents more than analysts expected, according to First Call.
The company also boosted its fiscal 2005 earnings guidance, but it wasn't enough for some investors, and Home Depot (down $0.79 to $43.00, Research) shares fell.
Wal-Mart Stores (down $0.81 to $56.89, Research) reported earnings of 54 cents a share, in line with estimates and up from 46 cents a year earlier. But investors focused on revenue, which grew a little less than what analysts were expecting, and the stock fell.
Charter Communications (down $0.55 to $2.16, Research) tumbled more than 20 percent and was the Nasdaq's second most active issue. The cable company said late Monday that it will raise $750 million through a convertible debt offering.
Google (down $12.33 to $172.55, Research) fell 6.7 percent. A restriction period expires Tuesday, allowing the company's employees and early investors to sell some of their shares.
Other 'Net stocks were also weaker, pushing the Goldman Sachs Internet (down 3.41 to 161.75, Charts) index down 2 percent.
Giving the market some support: U.S. light crude for December delivery sank 76 cents to settle at $46.11 a barrel on the New York Mercantile Exchange.
Market breadth was negative. On the New York Stock Exchange, losers beat winners 3 to 2 as 1.35 billion shares changed hands. On the Nasdaq, decliners topped advancers 9 to 5 as 1.91 billion shares traded.
Treasury prices fell, pushing the 10-year note yield up to 4.21 percent from 4.18 percent late Monday. Treasury prices and yields move in opposite directions.
In currency trading, the dollar inched lower versus the euro and higher versus the yen.
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