updated 1/6/2005 8:02:00 AM ET 2005-01-06T13:02:00

Wall Street’s 2005 slump extended into a third session Wednesday, as renewed concerns about inflation and higher interest rates sapped confidence from buyers.

Major Market Indices

Investors were still digesting the latest news from the Federal Reserve’s Open Market Committee, which sent stocks tumbling Tuesday when it released the minutes of its Dec. 14 policy meeting. Several members of the policy-making group expressed concerns about inflation, citing a drop in productivity growth, a weakening dollar and high oil prices, and hinted that interest rates were likely to be tightened more aggressively to deal with those issues.

“There’s a lot of indecisiveness today,” said Brian Williamson, an equity trader at The Boston Company Asset Management. “Sellers got washed out late yesterday and today, and the market found a level where it had been trading a month or so ago and it’s holding its ground. But because of what happened yesterday, you’re not seeing that much conviction in the market.”

The market’s action during the first few trading days of the year was somewhat unusual, particularly since 2004 ended on such a positive note, and with such high expectations for January. Still, after the kind of rally investors enjoyed during the last days of December, some pullback was to be expected, said Arthur Hogan, chief market analyst at Jefferies & Co.

“Yes, we expect earnings to be good, and yes, we expect good things out of corporate America, but we had a significant run-up and now we have to consolidate, and some folks are taking some profits,” Hogan said. “I wouldn’t write off 2005, I wouldn’t write off January, but I’d say that’s what’s behind the cautious attitude of investors.”

The Dow Jones industrial average closed the day off 32.95 points, or 0.3 percent, after staying in positive ground for most of the day. The blue-chip index dropped 99 points on Tuesday.

The broader Standard & Poor’s 500-stock index finished down 4.31 points, or 0.4 percent, while the Nasdaq composite index, full of technology stocks, was off 16.62 points, or 0.8 percent.

Crude futures fell after the U.S. government reported sizable increases in gasoline and heating oil inventories. Light, sweet crude for February delivery shed 52 cents to $43.39 a barrel on the New York Mercantile Exchange.

The U.S. Energy Department reported supplies of distillate fuel, which include heating oil and diesel, grew by 2 million barrels last week to 121.1 million barrels, sharply higher than expected, though still below year-ago levels. The tight but growing supply of heating oil comes amid relatively mild winter weather in the U.S. Northeast.

In economic news, the Institute for Supply Management said its barometer for business activity the services industry rose to a better-than-expected reading of 63.1 in December. Also, a monthly report on the number of announced corporate layoffs showed employers cut 109,045 jobs last month, marking the fourth consecutive month in which job cuts surpassed 100,000.

Delta Air Lines Inc. was down 51 cents, or 7 percent, at $6.80, after the carrier said it was cutting domestic fares by up to 50 percent and scrapping its unpopular Saturday-stay requirement in a move to lure back customers. The airline’s SimpliFares plan comes as Delta fights to stay out of bankruptcy.

Among retailers, Nordstrom Inc. was up $1.44 at $47.06 after saying December sales rose a better than expected 9.3 percent. Despite the strong sales, company executives said in a conference call they were comfortable with their current forecast for the fourth-quarter.

Circuit City Stores Inc. slid 8.4 percent, or $1.25, to $13.71, after reporting disappointing sales for December. The company said its consumer electronics stores were operating efficiently, but holiday customer traffic was down.

Xilinx Inc. shed 90 cents to $27.54 after lowering its third-quarter sales forecast, saying it expects an 11 percent to 12 percent decline due to lower bookings and shipments. Siebel Systems Inc. shed 27 cents to $9.61 despite saying it expects fourth-quarter results to beat Wall Street expectations based on improvements in profitability and all revenue categories.

Overseas, Japan’s Nikkei average sagged 0.7 percent. In Europe, France’s CAC-40 declined 0.9 percent, Britain’s FTSE 100 fell 0.9 percent and Germany’s DAX index lost 0.8 percent.

© 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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