NEW YORK - Surging gold and energy prices dragged stocks lower Monday as inflation fears curbed Wall Street's enthusiasm over solid first-quarter earnings from financial services firm Citigroup Inc.
Although Citigroup's upbeat results fed optimism about corporate earnings for the latest quarter, investors again focused on inflation and interest rates after comments from Federal Reserve Bank of Chicago President Michael Moskow indicated he felt the central bank must remain "vigilant" with its policy of boosting rates to stem price increases.
Without new data to gauge the economy's health and only a handful of earnings reports, Wall Street turned its attention to the commodities markets, where oil prices topped $70 a barrel and gold lingered at a 25-year high. But despite the threat of rising raw material costs, the inflation picture has remained somewhat positive recently, said Russ Koesterich, portfolio manager at Barclays Global Investments.
"Core inflation (excluding volatile energy and food prices) has stayed relatively contained," Koesterich said, adding that this week's reports on wholesale and consumer inflation should indicate where prices are increasing and draw a reaction from Wall Street.
At the close of trading, the Dow Jones industrial average dropped 63.87, or 0.57 percent, to 11,073.78, after opening the day in positive territory. The Dow is at its lowest level since closing at 10,972.28 on March 9.
Broader stock indicators were also lower. The Standard & Poor's 500 index fell 3.79, or 0.29 percent, to 1,285.33, and the Nasdaq composite index sank 14.95, or 0.64 percent, to 2,311.16.
Bonds rebounded from last week's slide, with the yield on the 10-year Treasury note slipping to 5.01 percent from 5.05 percent late Thursday. The dollar was mixed against other major currencies, and gold prices soared past $600 an ounce.
Political tension in Iran and Nigeria and concerns about shrinking U.S. gasoline reserves drove crude futures to their highest levels since hurricanes shut down much of Gulf Coast production late last summer. A barrel of light crude jumped $1.08 to settle at $70.40 on the New York Mercantile Exchange, where gasoline climbed 6.1 cents to $2.170 a gallon.
The Federal Reserve's Empire State manufacturing index - a measure of industrial activity in the New York region - dropped by almost half to 15.8 for April, missing economists' prediction of 24.
Aside from data on home building and inflation this week, investors will be focused entirely on corporate earnings. They will be looking for clues as to how companies - about half the Dow Jones industrials are scheduled to report this week - have dealt with higher interest rates, increased lending costs and an upswing in oil prices, as well as what they expect in the coming months.
"It's ultimately going to come down to how companies are responding" to all of these pressures, said Jack Caffrey, equities strategist for JPMorgan Private Bank. "It's worth noting that second- and third-quarter expectations have ticked higher over the past week or so."
Citigroup's earnings grew 4 percent to reach $1.12 per share for the quarter, with strength in stocks and fixed-income returns helping it beat analysts' average estimate of $1.02 per share. Citigroup added 30 cents to $48.35.
Elsewhere in the sector, Wachovia Corp. said its quarterly profit gained 7 percent on higher overall revenue and fees. Adjusted earnings of $1.12 per share matched Wall Street's target, but Wachovia nonetheless slid 80 cents to $55.05.
Discount broker Charles Schwab Corp. posted a sharp 68 percent jump in quarterly earnings - profit of 19 cents per share met analysts' estimates - as revenue climbed to its highest levels since the dot-com era. Charles Schwab also dropped 25 cents to $17.34.
Tyco International Ltd. said it agreed to pay regulators $50 million to settle accounting fraud charges, but did not admit any wrongdoing. The troubled technology conglomerate has been under investigation since 2002. Tyco fell 8 cents to $25.93.
The market shifted at midday and had declining issues ahead of advancers by 6 to 5 on the New York Stock Exchange, where volume of 1.28 billion shares matched the 1.28 billion shares that changed hands Thursday. The markets were closed Friday in observance of Good Friday.
The Russell 2000 index of smaller companies declined 1.64, or 0.22 percent, to 749.47.
Overseas, Japan's Nikkei stock average lost 1.35 percent. The markets in Europe were closed for Easter Monday.