Inflation fears, profit-taking push US stocks lower

NEW YORK (AP) - 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 General Motors Corp. also pressured the market. 

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 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 selloff 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 fell 75.37, or 0.7 percent, to 10,766.23.Broader stock indicators also fell. 

The S&P 500 was down 7.77, or 0.64 percent, at 1,203.60, and the Nasdaq composite index lost 13.68, or 0.66 percent, to 2,051.72. 

Despite persistent inflation fears and rising oil prices, stocks were mostly higher for the month, with only the Nasdaq - home to technology and smaller biotech companies - lagging slightly. 

Strong earnings and decent economic data helped the Dow industrials and other large-cap stocks to post gains after a disappointing January.  

For the month, the Dow was up 2.63 percent and the S&P 500 gained 1.89 percent, while the Nasdaq lost 0.52 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. 

In company news, 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 (euro8.3 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. 

Analysts at Banc of America Securities downgraded General Motors and rival Ford Motor Co. to "sell'' from "neutral,'' saying that both U.S. automakers 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. 

Declining issues outnumbered advancers by more than 2 to 1 on the New York Stock Exchange, where volume was heavy. 

The Russell 2000 index of smaller companies was down 3.47, or 0.54 percent, at 634.06. - AP 

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