Stocks plunged from lofty heights Thursday after a European Central Bank official pointed to rising price risks and a major Wall Street bank lowered its expectations for Chinese Internet company Baidu.com.
The news caused traders to take profits from big gains made earlier in the session. The Dow Jones industrial average and the Standard & Poor's 500 index had reached record levels after Wal-Mart Stores Inc. lifted its profit forecast.
But in the afternoon, ECB governing council member Axel Weber said rising inflation in the euro zone may require additional policy action, according to Dow Jones Newswires. The comments appeared to raise concerns on Wall Street that U.S. inflation could prevent the Federal Reserve from making another rate cut.
Investors have been betting on another rate reduction from the Fed, which lowered the target federal funds rate by half a percentage point on Sept. 18 in response to a tightening in the credit markets.
Also dampening Wall Street's mood was JPMorgan Chase & Co. lowering its revenue expectations for Baidu.com, said Kelmoore Strategy Funds portfolio manager Matt Kelmon. That hurt technology companies, which had been rising strongly in recent days.
"Stocks have come a long way really quickly," Kelmon said. "The stocks that have done the best are getting hammered right now."
In closing, the Dow sank 63.57, or 0.45 percent, to 14,015.12. Earlier in the session, the blue-chip index had soared more than 100 points to set a new trading high of 14,198.10.
Broader stock indicators also turned lower and gave back robust gains. The Standard & Poor's 500 index fell 8.06, or 0.52 percent, to 1,554.41, after reaching a new trading high of 1,576.09.
The Nasdaq composite index, which has touched nearly seven-year highs in recent sessions, fell.
Bonds were lower, but pared back steep losses after stocks turned lower. The yield on the benchmark 10-year Treasury note, which moves inversely to the price, rose late Wednesday.
The technology-dominated Nasdaq was hurt by Baidu.com, which fell Apple Inc., Oracle Corp., Amazon.com, Yahoo Inc. and Intel Corp. also tumbled. It sank 39.41, or 1.40 percent, to 2,772.20.
Worries about price risks came alongside spiking gold and oil prices. Light, sweet crude rose on the New York Mercantile Exchange after the government reported an unexpected drop in crude oil inventories and a surprise increase in refinery activity.
The U.S. trade deficit fell to its lowest level in seven months — a much better reading than Wall Street expected — amid record sales of American products. The Commerce Department said the deficit declined to $57.6 billion in August, down 2.4 percent from the July imbalance. Exports rose 0.4 percent to a record $138.3 billion, while imports dropped.
A weakening dollar makes U.S. exports more competitive abroad. On Thursday, the dollar fell versus the euro but rose against the pound and the yen.
Though the stock market's pullback looked dramatic, market watchers said it was to be expected give how far stocks have risen. Less than two months ago, the Dow was below 13,000. Whether the Dow's treads further above 14,000 will depend on upcoming third-quarter profit results, and if they indicate U.S. corporate health going forward.
"Earnings will come in better than expected again, and we'll trade higher again," Kelmon said.
Wal-Mart, the world's largest retailer, raised its third-quarter profit forecast even after reporting its same-store sales, or sales at stores open at least a year, rose a weaker-than-expected 1.4 percent in September.
Wal-Mart, the biggest advancer among the 30 stocks that make up the Dow industrials, jumped.
Another big gainer in the Dow was General Motors Corp., which rose after union members ratified a new contract with the automaker.
Declining issues outnumbered advancers by about 5 to 3 on the New York Stock Exchange.
The Russell 2000 index of smaller companies fell.
Overseas, Japan's Nikkei stock average closed up 1.64 percent after a rating agency upgraded the country's debt. Stocks in Europe also rose. Britain's FTSE 100 rose, Germany's DAX index advanced, and France's CAC-40 rose.