Stocks slip on inflation fears

NEW YORK (CNNMoney.com) -- Stocks fell Tuesday morning but were off their lows after a surge in prices paid by businesses spurred inflation fears and a massive sell-off in Asia rocked the market.

The Dow Jones industrial average (down 21.87 to 12,419.40, Charts) and the broader S&P 500 index (down 1.81 to 1,420.67, Charts) both fell about 0.2 percent an hour into the session.

The tech-fueled Nasdaq composite (down 13.44 to 2,422.13, Charts) tumbled 0.5 percent amid disappointing earnings from software maker Oracle.

The Labor Department's Producer Price Index, a measure of prices paid by businesses, rose sharply in November, posting its biggest gain since 1974.

Even more worrisome was the reading on core PPI, which strips out often volatile food and energy prices. Core PPI jumped 1.3 percent, dashing hopes that inflation is no longer a worry.

Also pressuring stocks was a sell-off in Asia, which was sparked after the Thai central bank placed limits on foreign investment in an effort to curb the rise of its currency, the baht.

Thai stocks plummeted 13 percent, while major markets in Japan and Hong Kong fell more than 1 percent. But after witnessing the hammering stocks took following the move, Thai authorities said the restrictions wouldn't apply to equity investments.

Also on the economic front, homebuilding activity rebounded in November at a pace that exceeded Wall Street's expectations. (Full story)

Builders started work on homes at an annual pace of 1.59 million in November, up from the 1.49 million rate in October, which had been the lowest reading since July 2000.

Circuit City (down $3.81 to $18.95, Charts) sank 16 percent after it posted a quarterly loss and said its holiday sales were hurt by fierce price competition from Wal-Mart. Analysts had expected the electronics retailer to report a profit.

Concerns about holiday sales spread to other retailers. Best Buy (down $1.39 to $47.95, Charts) lost 4 percent, and J.C. Penney (down $0.41 to $79.46, Charts) dipped 2 percent.

Among tech stocks, shares of software maker Oracle (Charts) tumbled 5 percent. The company reported earnings in line with Wall Street's estimates late Monday, but some investors had expected even better results.

Homebuilder Hovnanian Enterprises (Charts) reported a loss for its latest quarter late Monday and issued a full-year outlook that fell sharply below forecasts. Shares of the builder fell 4 percent.

Market breadth was negative. On the New York Stock Exchange, decliners beat advancers by a margin of 9 to 5 on volume of 282 million shares. On the Nasdaq, losers topped winners by a margin of nearly 2 to 1 as 394 million shares changed hands.

Oil prices fell as weather remained mild in the Northeast, the region of the country that makes the greatest use of home heating oil. U.S. crude light crude for January delivery lost 31 cents to $61.90 a barrel on the New York Mercantile Exchange.

Treasury prices edged lower, raising the yield on the benchmark 10-year note to 4.59 percent from 4.58 percent late Monday. Bond prices and yields move in opposite directions.

The dollar drifted lower against the euro and the yen.

In global trade, Asian markets finished the session lower, and major stock indexes in Europe fell in early afternoon trading.

After the buyout boom: The bust?