Inflation fears hound Wall Street
Futures pull back as investors bet Fed will hike rates sooner than expected; oil gains.
NEW YORK (CNNMoney.com) -- Stocks looked set to tumble at Tuesday's open after Federal Reserve chief Ben Bernanke fanned inflation concerns.
About two hours before the market open, Nasdaq and S&P futures were lower and indicating a negative start for Wall Street.
Bernanke: The Fed chairman said in a speech Monday night that inflation has remained high and that the central bank would "strongly resist an erosion of longer-term inflation expectations." The comments unnerved investors as they bet that the Fed would raise rates sooner than expected.
A recent jump in the unemployment rate had led some to lower their rate hike expectations, but Bernanke said in his speech that the danger that the economy has fallen into a "substantial downturn" appears to have eased.
Energy: Oil prices gained in electronic trading. U.S. crude for July delivery rose $1.32 to $135.67 a barrel. The International Energy Agency lowered on Tuesday its forecast for global oil demand this year but said markets were still off balance.
International trade: The Census Bureau and the Department of Commerce will release the April trade balance report at 8:30 a.m. ET. Analysts expect a deficit of $60 billion.
Airlines: Some of the major U.S. airlines on Monday retracted the fare increases that they imposed over the weekend after they failed to take hold with consumers, the AP said. AMR Corp.'s (AMR, Fortune 500) American Airlines was the first carrier to impose a $20 roundtrip fare increase, followed by Delta Air Lines (DAL, Fortune 500), UAL Corp.'s (UAUA, Fortune 500) United Airlines and Continental Airlines (CAL, Fortune 500), the AP said. Continental retracted its increase, prompting the other airlines to do the same.
Other markets: The dollar edged up against the euro and rose to a three-month high versus the yen after President Bush called for a stronger U.S. currency. Bernanke's hawkish inflation comments also helped support the dollar.
Asian stocks finished the session lower, dragged down by a 7.7% drop in China's benchmark index. European shares fell in midday trading. 
