Stocks slide on oil spike

Wall Street erases the day's advance as crude prices settle at record $100.01 and gold prices jump, raising inflation fears.

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By Alexandra Twin, CNNMoney.com senior writer

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NEW YORK (CNNMoney.com) -- Stocks ended lower Tuesday, erasing session gains, after oil prices settled at a record $100.01 a barrel and gold and other commodities spiked, raising worries about how inflation will impact an already weakened economy.

Weakness in telecom stocks and the latest problems for the bank sector also played a role in the afternoon turnaround.

The Dow Jones industrial average (INDU) and the broader Standard & Poor's 500 (SPX) index both ended with modest declines. The Nasdaq composite (COMP) lost 0.7%.

After the close of trade, Hewlett-Packard (HPQ, Fortune 500) reported higher fiscal first-quarter sales and earnings that topped forecasts. The personal computer and printer maker also boosted its current-quarter profit outlook.

Wednesday brings relevant economic reports on consumer prices as well as housing starts and building permits. In the afternoon, the minutes from the last Federal Reserve policy meeting will be released.

Tuesday's market. All three major gauges had posted big gains through the mid-afternoon but gave up most of that advance as crude oil prices gained momentum amid ongoing worries about potential OPEC production cuts coupled with the fallout from a Texas refinery fire.

"You can get these quick rallies here and there, even for a day or a week, but there's still a downtrend," said Joseph Saluzzi, co-head of equity trading at Themis Trading.

Regarding the rise in oil prices Tuesday, he said that while it boosts the energy stocks, it clearly weighs on investor sentiment as well. Additionally, gold prices surged nearly $24 an ounce Tuesday, reflecting inflation fears.

Treasury prices slumped, boosting the corresponding yields, and the dollar fell versus other major currencies.

Tuesday's market. On Tuesday, Dow component Wal-Mart Stores reported higher quarterly profit but also issued a cautious outlook for its current fiscal year.

With consumer spending fueling roughly two-thirds of economic growth, the world's largest retailer is seen as a barometer for the health of the economy.

The strong quarter paired with a mild outlook sent investors a mixed signal amid worries about a pullback in consumer spending. Wal-Mart (WMT, Fortune 500) shares ended barely higher.

Chevron (CVX, Fortune 500) climbed in its first day of trading as a Dow component. The second new Dow component, Bank of America (BAC, Fortune 500), ended little changed. Chevron and Bank of America replaced Altria (MO, Fortune 500) and Honeywell (HON, Fortune 500) in the Dow starting Tuesday.

Along with Chevron, Exxon (XOM, Fortune 500), ConocoPhillips (COP, Fortune 500) and BP (BP) were among the big oil stocks rising on the session, following a surge in crude oil prices.

On the downside, AT&T (T, Fortune 500) and Verizon Communications (VZ, Fortune 500) slumped after the two companies announced dueling unlimited calling plans as investors worried about how the plans would impact profitability.

All U.S. financial markets were closed Monday for the Presidents Day holiday.

Bank woes continue. Lehman Brothers (LEH, Fortune 500) fell 2.5% after the Wall Street Journal reported the brokerage could face a considerable writeoff due to its exposure to bad mortgage bets.

Credit Suisse Group (CS) slumped 5.2% after saying that it would have to cut its profit by $1 billion in the first quarter after traders overvalued its holdings in asset-backed securities by nearly $3 billion. The traders have been suspended, the European bank said.

Barclays (BCS) lifted its 2007 writedowns related to assets tied to U.S. subprime mortgages, but the European bank also reported profit that topped expectations. U.S.-traded shares jumped 9%.

Dow component AIG (AIG, Fortune 500) rallied 2% after financial weekly Barron's said that the stock, following its recent selloff, is now a "screaming buy."

Bond insurers were also in focus. MBIA (MBI) said Tuesday that Chairman and Chief Executive Gary Dunton was stepping down, to be replaced by its former CEO Joseph "Jay" Brown, who retired in May.

Ambac Financial (ABK) is close to finalizing a plan that would help it raise $2 billion in capital, according to a Wall Street Journal report. The additional money would help it maintain its top financial strength rating.

Credit ratings agencies have threatened to cut the bond insurers financial ratings, which would make it harder for them to generate new business, and would also cause another wave of writedowns for the big banks.

In other news, Delta (DAL, Fortune 500) and Northwest (NWA, Fortune 500) are reportedly closer to their long-rumored merger. (Full story).

Market breadth was mixed. On the New York Stock Exchange, winners beat losers 9 to 7 on volume of 1.43 billion shares. On the Nasdaq, decliners topped advancers by a narrow margin on volume of 1.97 billion shares.

Other markets. Treasury prices slumped, raising the yield on the benchmark 10-year note to 3.89% from 3.78% late Friday. Bond prices and yields move in opposite directions.

In currency trading, the dollar fell versus the yen and euro.

U.S. light crude oil for March delivery rose $4.51 to settle at $100.01 a barrel on the New York Mercantile Exchange. Prices briefly hit $100.10 a barrel during the session.

COMEX gold for April delivery rose $23.70 to settle at $929.80 an ounce, along with other dollar-traded assets.  To top of page

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.