updated 6/14/2006 9:15:08 AM ET 2006-06-14T13:15:08

Wall Street resumed its retreat with a third straight session of losses Tuesday, as declines in oil and gold prices did little to calm anxiety over higher interest rates and a slowing economy. The Dow Jones industrial average is now negative year-to-date for the first time in 2006.

Major Market Indices

Investors struggled to make sense of the Labor Department’s May producer price index (PPI) , which showed a mild up tick in wholesale prices but a stronger-than-forecast rise in inflation without food or energy costs. The data suggested that energy costs did not grow as much as expected, but the higher core prices nonetheless kept the market on edge.

While a downturn in commodities fed some hopes about easing inflation, persistent uncertainty about whether the Federal Reserve will continue boosting interest rates left investors unwilling to buy stocks amid fears of an economic crash.

“[The PPI data] were not conclusive enough to drive the market,” said Rick Pendergraft, an equity trader for Schaeffer’s Investment Research. If Wednesday’s consumer price data comes in below or meets expectations, that might spark a rally following stocks’ hefty slide over the past month, he said.

Wall Street’s pullback trailed sharp losses on stock markets worldwide , which were driven by worries that a weakening U.S. economy will overturn other economies in its wake. The continued inversion of short- and long-term bond yields was also evidence of the market’s expectations of an economic slowdown.

The Dow Jones industrial average finished a day characterized by wild swings in and out of negative territory with its seventh-straight sell-off and in negative territory for the year, sinking 86.44 points, or 0.80 percent. On Monday, the Dow plunged nearly 100 points to see its worst finish since early February.

Broader stock indicators also pulled back and widened their losses for the year. The Standard & Poor’s 500-stock index fell 12.72 points, or 1.03 percent, while the Nasdaq Composite index lost 18.85 points, or 0.90 percent.

Crude oil futures plunged as Tropical Storm Alberto posed little threat to refineries in the Gulf of Mexico. The price of a barrel of light crude fell $1.80 to finish at $68.56 on the New York Mercantile Exchange.

Overseas stock markets continued suffering from concerns that rising interest rates will U.S. demand for foreign-made products. Japan’s Nikkei stock average plunged 4.14 percent to a two-year low, and stocks in India slid 4.4 percent to a 52-week low.

Elsewhere overseas, Britain’s FTSE 100 lost 1.8 percent, Germany’s DAX index sank 1.92 percent and France’s CAC-40 was lower by 2.24 percent.

The Labor Department’s PPI report — seen as a precursor to consumer-level inflation — gave Wall Street a mixed reading on wholesale prices. While overall PPI for May gained just 0.2 percent, core prices rose 0.3 percent to top economists’ estimates of 0.2 percent.

But Ken McCarthy, chief economist for vFinance Investments, said the gain in core PPI was not a major concern since annual core inflation still stood at a mild 1.5 percent rate. He added that the PPI was less significant because it included only finished goods, while Wednesday’s consumer price index would also account for services.

“It’s encouraging that we’re not seeing [the impact of energy costs] in core finished goods,” McCarthy said. “But this is just the appetizer before tomorrow’s main event.”

Other data reinforced beliefs that soaring gasoline prices have begun to choke consumer spending, which might cool the economy enough to keep the Fed from hiking short-term lending rates. The Commerce Department said May retail sales grew 0.1 percent after surging 0.8 percent in April; excluding automobiles, retail sales gained 0.5 percent.

Bonds drifted, with the yield on the 10-year Treasury note slipping to 4.96 percent from 4.98 percent late Monday. However, the 2-year yield stood at 5.01 percent; the inversion of yields signaled heightened expectations for slowing economic growth.

The U.S. dollar gained on the Japanese yen and was flat against European currencies; gold prices plunged to about $570 per ounce and carried other metals lower, which bode well for the inflation outlook.

In earnings news, Goldman Sachs Group Inc. posted sharply better-than-forecast results for the second quarter but warned that continued market weakness could hurt its results. Goldman Sachs skidded $5.75 to $139.25.

Best Buy Co. said its profit swelled 38 percent to beat estimates as customers bought more big-ticket items and cost-cutting measures boosted its margins. Best Buy jumped $2.66 to $51.69.

Jabil Circuit Inc. cut its third-quarter earnings forecast but kept its revenue target intact. Jabil shares plunged $7.11 to $25.31.

© 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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