updated 3/1/2005 8:56:17 AM ET 2005-03-01T13:56:17

Stocks skidded Monday as investors, concerned about rising prices and the threat of inflation, took profits after last week’s three-day rally. Volatility in pharmaceutical stocks and an analyst downgrade of Dow Jones industrial average component General Motors Corp. also pressured the market.

Major Market Indices

Fresh worries about inflation arose after the Commerce Department’s latest reading on consumer income and spending. Personal income fell less than expected in January, but spending was flat and core consumer prices rose 0.3 percent — the fastest rate in more than three years.

Rising oil prices were also a concern, as a barrel of light crude settled at $51.75, up 26 cents, on the New York Mercantile Exchange. The confluence of news, along with nervousness about a raft of important economic data due later in the week, triggered the slide.

“When you have the [Standard & Poor’s 500-stock index] up three days in a row like we had last week, you’ll definitely see some money coming off the table,” said Neil Massa, equity trader at John Hancock Funds. “It’s a broad sell-off here, not just one sector, and the money’s not being put to use anywhere. So I think folks are just waiting for later in the week.”

The Dow Jones industrial average was off 75.37 points, or 0.7 percent, at the close of trading, having dropped over 100 points earlier in the session, while the broader Standard & Poor’s 500-stock index closed off 7.77 points, or 0.6 percent. The tech-rich Nasdaq composite index fell 13.68 points, or 0.7 percent.

Despite inflation fears and rising oil prices, stock indices are mostly higher for the month of February, with the Nasdaq — home to technology and smaller biotech companies — lagging. Strong earnings and decent economic data helped the Dow industrials and other large-cap stocks to post gains after a disappointing January. The Dow rose 2.6 percent in February, the S&P 500 rose 1.9 percent and the Nasdaq lost 0.5 percent.

On Friday, the dollar fell slightly against most major currencies, despite news of higher consumer prices, while gold continued to climb modestly. The bond markets fell sharply, with the yield on the 10-year Treasury note rising to 4.38 percent — its highest yield in more than three months.

With inflation still an issue in many investors’ minds, Wall Street will watch closely as Federal Reserve Chairman Alan Greenspan testifies before the House Budget Committee on Wednesday. A number of key economic reports are also due during the week, including the Labor Department’s job creation report on Friday.

“There’s a lot that lies ahead. As a result, a lot of investors are just sort of watching to see how the economic numbers unfold and see what Alan Greenspan says,” said Hugh Johnson, chairman and chief investment officer of Johnson Illington Advisors. “There’s a lot of cross-currents today, but overall, the market is waiting for news that still has to be played out this week.”

Pharmaceutical and biotechnology stocks were hammered in early trading after Biogen Idec Inc. and Elan Corp. Plc announced they were voluntarily pulling their Tysabri multiple sclerosis drug from the market due to the death of a patient taking the drug. Biogen tumbled $28.63, or 42.6 percent, to $38.65, while Elan plummeted $18.88, or 70.2 percent, to $8.02.

The sector also was roiled as Mylan Laboratories Inc. and King Pharmaceuticals Inc. called off their proposed merger after failing to reach a revised agreement. Mylan rose 66 cents to $17.60, while King was off 76 cents at $9.49.

Department store chain Federated Department Stores Inc. lost 34 cents to $56.45 after it finalized an $11 billion takeover agreement for May Department Stores Co. over the weekend. The combined company would be the largest department store company in the nation. May slipped 82 cents to $34.53.

Trucking firm USF Corp. surged $8.98, or 23.1 percent, to $47.80 after it agreed to be bought by larger rival Yellow Roadway Corp. for $1.47 billion in cash and stock. The deal is expected to close by summer. Yellow was down $3.56 at $57.75 on the news.

Analysts at Banc of America Securities downgraded General Motors and rival Ford Motor Co. to “sell” from “neutral,” saying that both U.S. auto makers would continue to lose market share to their European and Japanese rivals. GM, a Dow component, slid $1.23 to $35.66 and Ford lost 35 cents to $12.65.

Overseas, Japan’s Nikkei stock average rose 0.71 percent. In Europe, Britain’s FTSE 100 closed down 0.76 percent, France’s CAC-40 fell 0.18 percent for the session, and Germany’s DAX index gained 0.04 percent.

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

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