NEW YORK (CNN/Money) - Stocks slumped Wednesday as oil prices hit a record high and General Motors issued a profit warning, pushing investors out of equities and into bonds and other assets.

A drop in the dollar and some disappointing economic news -- including a widening of the U.S. trade gap to a record high in the fourth quarter -- added to the selling.

The Dow Jones industrial average (down 112.03 to 10,633.07, Charts) sank 112 points, or just over 1 percent.

The broader Standard & Poor's 500 (down 9.68 to 1,188.07, Charts) index lost 0.8 percent and the Nasdaq composite (down 19.23 to 2,015.75, Charts) fell just under 1 percent.

"I think it's a combination of the oil prices and GM today," said Jim Melcher, founder and president of Balestra Capital. "There's been a heightened focus on inflation recently, and energy prices are a major component in inflation."

In terms of GM's warning, if the company's corporate bonds are cut to junk, a lot of people will have to sell, Melcher added, and they seemed to take pre-emptive strikes against that Wednesday by fleeing GM bonds for the perceived safety of Treasury bonds.

Stocks have been on a downturn for the last week or so, after the Dow and S&P 500 hit nearly 4-year highs in early March.

As to whether stocks are likely to keep consolidating in the near-term or to turn higher, Melcher said that there is still a lot of liquidity in the system, with people wanting to put money to work. "However, we're moving into a slower time for money flows in March and April."

Stock action over the next few days is likely to be influenced by the economic news and earnings and by Friday's quarterly options expiration.

The report on weekly jobless claims is due before the start of trading Thursday. The February read on leading economic indicators is due shortly after the start of trading, and the Philadelphia Fed index, a regional manufacturing survey, is due around noon.

Earnings are expected in the morning from FedEx, Morgan Stanley and Goldman Sachs, among others.

After the close of trade Wednesday, Viacom (up $2.71 to $37.00, Research) confirmed that it is exploring the possibility of splitting up its business into at least two publicly-traded companies, as had been suggested by news reports earlier in the day. Shares, which rose nearly 8 percent during the session, added another 4.5 percent after the close.

Lexar Media (Research) warned that fourth-quarter revenue will miss expectations and said that it is probing certain accounting controls. The maker of memory chips that store digital media also said that it has asked for an extension in filing its annual regulatory report. Shares plunged 18 percent in extended-hours trading.

Oil jumped after a weekly report showed that gasoline supplies and distillate supplies -- used in heating oil -- both fell more than expected. Crude inventories rose more than expected.

U.S. light crude oil for April delivery jumped $1.41 to settle at $56.46 a barrel on the New York Mercantile Exchange, an all-time closing high. The commodity also managed a new trading high of $56.60 near the end of the session, before backing off slightly by the settle.

"They're taking oil higher because of the inventory numbers," said Tom Schrader, managing director of U.S. equity trading at Legg Mason, "but the thing with oil is that there's a lot of whipping and sawing in the oil pits, a lot of things pushing oil around."

Oil prices had fallen moderately in the morning after OPEC producers, meeting in Iran, agreed to a 2 percent increase in daily production quotas so as to trim the price of crude oil.

Investors seemed to take the spike in oil prices -- paired with the current accounts deficit -- as inflationary, therefore sparking the stock exodus.

Investors have grown very sensitive to signs of inflation, which could push the Federal Reserve to raise interest rates more aggressively than the "measured" pace it has stuck to since last summer. Higher rates tend to slow economic growth and corporate profits, thus hurting stock prices.

Treasury prices rallied, lowering the 10-year note yield to 4.51 percent from 4.53 percent late Tuesday. Bond prices and yields move in opposite directions.

GM, which warned it would post a big loss in the first quarter due to weakness in its North American auto business, saw its stock tumble, dragging other automakers with it.

GM (down $4.71 to $29.01, Research) stock lost 14 percent, DaimlerChrysler (down $0.91 to $45.20, Research)'s U.S. shares fell about 2 percent and Ford Motor (down $0.32 to $11.91, Research) slipped 2.6 percent, despite reaffirming its earlier first-quarter and fiscal-year 2005 earnings.

Debt-rating agency Standard & Poor's cautioned it could cut GM's debt to "junk" status, which could boost its borrowing costs.

Among other movers, Bear Stearns (down $3.90 to $102.13, Research) fell 3.7 percent on a "sell-the-news" reaction to the brokerage's higher-than-expected quarterly earnings. Like Lehman Brothers, which reported Tuesday, the company benefited from increased bond trading and rising equity markets.

Chemicals, steel and materials -- many of the interest-rate sensitive sectors that had powered the recent blue-chip advance -- declined.

Losses were broad-based, with 24 out of 30 Dow issues falling.

One of the session's few strong sectors was oil, which rose along with the commodity. The Amex Oil (up 1.67 to 853.82, Charts) index gained 0.2 percent.

J.P. Morgan (unchanged at $36.25, Research) was unchanged after agreeing to pay $2 billion to settle an investor lawsuit regarding its role in the $11 billion accounting scandal that led to WorldCom's bankruptcy.

Among the standouts in the day's reports, the U.S. current account deficit widened beyond expectations to a record $187.9 billion in the fourth quarter, the government said.

U.S. industrial production rose 0.3 percent in February, up from January's gain and shy of estimates. And the housing market continued to show resilience, with new construction up more than analysts had forecast in February.

Market breadth was negative. On the New York Stock Exchange, losers beat winners 8 to 3 on volume of 1.64 billion shares. On the Nasdaq, decliners topped advancers by more than 5 to 3 on volume of just under 2 billion shares.

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

COMEX gold rose $2.80 to settle at $444.20 an ounce, gaining with other dollar-traded commodities.

In global trade, Asian stocks ended higher Wednesday, and European markets closed lower.