Big selloff on Wall Street
Stocks decline after economic reports show slower growth and rising wholesale inflation. Oil settles down for the third day in a row.
NEW YORK (CNNMoney.com) -- Stocks tanked Tuesday after reports showed slower growth and higher pricing pressure, overshadowing any relief that oil prices fell for the third day in a row and that Goldman Sachs reported better-than-expected earnings.
The Dow Jones industrial average (INDU) lost 0.9%. The broader Standard & Poor's 500 (SPX) index and the tech-heavy Nasdaq composite (COMP) both slipped about 0.7%.
U.S. light crude oil for July delivery settled lower for the third day in a row, down 60 cents to $134.01 a barrel.
But longer-term forecasts are for oil prices to keep pushing higher, which had added to worries about the already-strapped economy. Economic reports on Tuesday showed a surprisingly large rise in the May Producer Price Index (PPI) and a drop in industrial production.
"The PPI minus food and energy was fine, but including it, it was very inflationary and the industrial production report shows you we're not growing," said Dave Rovelli, managing director of U.S. equity trading at Canaccord Adams.
He said the economic reports were adding to confusion about the economic outlook, and also about whether the Federal Reserve is likely to lift interest rates when it meets at the end of the summer.
Wednesday brings earnings reports from both Morgan Stanley (MS, Fortune 500) and FedEx (FDX, Fortune 500) before the opening bell.
"Hopefully if Morgan is decent tomorrow, that could help," Rovelli said.
Later in the morning, the government releases its weekly crude oil supply report. Analysts are expecting oil stockpiles to have fallen by 2 million barrels, according to a survey from Platts, an energy research firm.
Gas and oil have climbed to record levels in recent months, and as energy prices have become crucial to the health of the economy, the stock market has been reacting to the oil market.
Wholesale prices rise: The May PPI, a measure of wholesale inflation, rose 1.4% versus forecasts for a rise of 1%, reflecting the spike in food and energy costs. PPI rose 0.2% in April.
The so-called core PPI, which strips out volatile food and energy prices, climbed 0.2%, as expected, after increasing 0.4% in the previous month.
Goldman Sachs beats expectations: The investment bank reported sales and earnings that fell from a year ago, but topped estimates, showing that it continues to avoid the worst of the credit market fallout. Goldman Sachs (GS, Fortune 500) shares fell 1.5%. (Full story).
Other financial shares declined too. American Express (AXP, Fortune 500) slipped after brokerage Friedman Billings reiterated its "underperform" rating, saying that it expects the company to see more losses going forward, due to the strapped consumer, Briefing.com reported.
Bank of America (BAC, Fortune 500), Merrill Lynch (MER, Fortune 500) and Morgan Stanley (MS, Fortune 500) all declined as well.
Among other movers, CME Group (CME), parent company of the Chicago Mercantile Exchange, rallied on news that its purchase of NYMEX has received clearance from the Justice Department.
Best Buy (BBY, Fortune 500) reported a lower quarterly profit that nonetheless topped estimates. The company also reiterated its full-year sales and earnings forecasts. However, investors seemed to take a sell-the-news approach, sending shares 5.3% lower. (Full story).
Market breadth was negative. On the New York Stock Exchange, losers beat winners 3 to 2 on volume of 1.09 billion shares. On the Nasdaq, decliners topped advancers by more than 9 to 5 on volume of 1.84 billion shares.
Other economic news: The morning's other economic data showed continued weakness in the housing and manufacturing sectors.
Housing starts and building permits both fell in May, with starts missing forecasts and permits - a measure of builder confidence - topping estimates. The number of single-family home starts fell to a 17-year low. (Full story).
Additionally, industrial production fell 0.2% in May, according to a Federal Reserve report Tuesday morning that was worse than expected. Capacity utilization also dipped modestly, to 79.4% from 79.6% in the previous month.
Other markets: COMEX gold for August delivery rose 60 cents to settle at $886.90 an ounce.
The national average price for a gallon of regular unleaded gas eased to $4.078 from a record $4.080 the previous day, according to AAA. (Full story).
In currency trading, the dollar fell versus the euro and the yen.
In the bond market, Treasury prices gained, lowering the yield on the benchmark 10-year note to 4.20% from 4.27% late Monday. Bond prices and yields move in opposite directions. 
