msnbc.com news services
updated 5/15/2006 8:32:03 AM ET 2006-05-15T12:32:03

Stocks tumbled for a second straight session Friday, dragging the Dow Jones industrial average down 120 points, as a pullback in oil prices hit energy shares, such as Dow component Exxon Mobil, and a jump in import prices fanned worries about inflation.

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Friday’s sell-off, which ended a week of disappointing profits and outlooks from technology companies, dragged the Nasdaq composite index to its worst weekly loss in 13 months, while the Dow snapped a five-week winning streak, its longest in six months.

“I certainly get the sense that it’s going to be hard to rally,” said market analyst Art Hogan at Jefferies & Co. “We’re going to take it for what it is and come back next week fighting. There will be plenty for us to think about in terms of the pace of economic growth.”

Friday’s decline also built on steep losses in Thursday’s session , when surging commodities prices compounded anxiety that the Federal Reserve could continue its two-year streak of interest rate hikes. And next week’s reports on homebuilding and wholesale and consumer prices could also prove troublesome for the inflation picture.

“With commodities prices reaching new highs, people are saying maybe global growth is stronger than anticipated,” said Brian Gendreau, investment strategist for ING Investment Management. “I think that has put [the idea of] more Fed tightening in people’s minds.”

Adding to continued unease over interest rates, the Labor Department said prices for imported goods rebounded sharply in April , further unsettling investors. Although import prices were flat, excluding oil, that did little to soothe concerns about energy costs lifting prices elsewhere.

A sharp drop in consumer confidence also reinforced beliefs that high gas prices at the pumps could choke consumer spending. Meanwhile, Wall Street also weighed the importance of cooling oil prices.

The Dow Jones industrial average finished the day down 119.94 points, or 1.04 percent, extending its losses in Thursday’s session, when it tumbled 142 points, chalking up its biggest single-day drop since falling 213 points on Jan. 19. The Dow is still within striking distance of its best-ever close, reached on Jan. 14, 2000.

The broader Standard & Poor’s 500-stock index finished Friday down 14.68 points, or 1.12 percent, while the Nasdaq composite, full of technology stocks, dropped 28.92 points, or 1.27 percent, chalking up its biggest two-day loss since April 2005.

Bonds continued sliding, with the yield on the 10-year Treasury note rising to 5.19 percent from 5.16 percent late Thursday. The interest rate debate also weighed on the dollar, which fell further against the yen. Gold prices pulled back from fresh 25-year highs, while lowered forecasts for global oil demand eased pressure on the oil market .

In economic news, the Labor Department said prices for goods shipped to the United States swelled 2.1 percent last month after declining 0.2 percent the previous month, but import prices without energy were unchanged. Export prices rose 0.6 after gaining 0.2 percent in March.

Elsewhere, the Commerce Department said the trade deficit narrowed by $3.6 billion to $62 billion, while economists were predicting a $1.4 billion increase.

The University of Michigan’s consumer-sentiment index for May plummeted 8.4 points to 79. Economists were looking for the index to drop just 1.4 points to 86.

Expedia Inc. plunged $5.15 to $14.51 after its first-quarter profit declined and fell far short of Wall Street expectations. The online travel company said higher costs outpaced a modest jump in revenue.

Electronics retailer Best Buy Co. is paying $180 million to acquire a majority stake in Jiangsu Five Star Appliance Co., China’s fourth-largest appliance and electronics seller. Best Buy tumbled $1.22 to $52.60.

General Motors Corp. turned lower despite KeyBanc Capital Markets upgrading the automaker to “buy” on beliefs that negotiations with its union will be successful. GM rose 28 cents to $26.09.

Overseas, Japan’s Nikkei stock average tumbled 1.54 percent. Britain’s FTSE 100 plunged 2.15 percent, Germany’s DAX index sank 2.29 percent and France’s CAC-40 was lower by 2.14 percent.

The Associated Press and Reuters contributed to this report.

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