U.S. Stocks Drop as Inflation Tops Forecasts; Amazon, EBay Fall

Dec. 14 -- U.S. stocks fell, heading for their steepest weekly drop in more than a month, after accelerating inflation raised concern that higher prices will curb consumer spending.

Black & Decker Corp. declined the most in five months after the largest U.S. power-tool maker cut profit forecasts. Circuit City Stores Inc. posted its steepest drop since Nov. 9 on analyst reports saying the second-biggest U.S. consumer- electronics chain will report a third-quarter loss. Amazon.com Inc. and EBay Inc. retreated after Internet research firm ComScore Inc. said holiday online sales grew at the slowest pace ever.

The Standard & Poor's 500 Index declined 10.24, or 0.8 percent, to 1,478.17 at 2:34 p.m. in New York. The Dow Jones Industrial Average slid 93.4, or 0.7 percent, to 13,424.56. The Nasdaq Composite Index lost 13.75, or 0.5 percent, to 2,654.74. About four stocks dropped for every one that rose on the New York Stock Exchange. Benchmarks in Asia fell, while most European indexes rose.

``The markets will have some indigestion with this inflation number,'' said Michael Strauss, who helps oversee about $43 billion as market strategist and chief economist at Commonfund in Wilton, Connecticut. ``Consumers are recognizing they really have to hunker down as they see their heating oil costs and their gasoline costs.''

The consumer price index climbed 0.8 percent in November, the most since September 2005, the Labor Department said. Prices excluding food and energy rose 0.3 percent, also more than forecast.

Dollar Surges

The dollar advanced the most against the euro since May 2005 on speculation the Federal Reserve won't cut interest rates again. Odds that the Fed will hold its benchmark lending rate at 4.25 percent at its January meeting rose to 22 percent after the inflation report, up from no chance since the last quarter-point rate-cut on Dec. 12.

The S&P 500 has lost 1.8 percent this week, while the Dow average has dropped 1.5 percent and the Nasdaq is down 1.9 percent.

Black & Decker slumped $5.99, or 7.5 percent, to $74.14. Costs from the recall of Dewalt XRP cordless drills and a sales decline in tools and appliances in North America led the company to cut its annual and quarterly projections.

Circuit City fell 65 cents to $6.76. The company's profit margins may shrink as television prices fall and consumers buy fewer warranties, said Bear Stearns Cos. analyst Christopher Horvers. Morgan Stanley analyst Gregory Melich also said the retailer will likely post a third-quarter loss.

Amazon.com, the biggest online bookstore, fell $2.29 to $90.11. EBay, the largest Internet auctioneer, dropped $1.16 to $32.93. S&P 500 retail stores lost 1.6 percent.

'Getting Hit'

Internet sales from Nov. 1 through Dec. 11 increased 19 percent to $20.5 billion, Reston, Virginia-based ComScore said. Online sales in November and December may rise 20 percent, a record low for the industry, and slower than the 26 percent pace a year earlier.

U.S. retailers may report the slowest sales growth since 2002 this year as higher fuel and food costs discourage spending during the holiday season, the National Retail Federation said.

``The consumer is getting hit by higher energy prices and given the state of the overall housing market, we're expecting consumers to pull in their spending,'' said Rose Grant, who helps manage about $2 billion at Eastern Investment Advisors in Boston. ``We don't think consumer spending will be as strong as in past quarters.''

Hotel Slowdown

Hotel stocks declined after a PricewaterhouseCoopers LLP report said U.S. revenue growth may slow for the industry in 2008. Marriott International Inc., the world's largest hotel company, slumped for a fourth day, losing $2, or 5.9 percent, to $31.82. Starwood Hotels & Resorts Worldwide Inc., the third- biggest U.S. hotel company, lost $2.65 to $46.80.

Merrill Lynch & Co. slipped 48 cents to $57.35. Financial news network CNBC said writedowns at the third-biggest U.S. securities firm may increase by as much as $6 billion.

Goldman Sachs Group Inc. added $4.09, or 2 percent, to $212.57. The world's biggest securities firm may post record full-year profit of more than $11 billion on Dec. 18, boosted by $4 billion from bets on subprime mortgage-related lending, the Wall Street Journal reported, citing analysts.

The gains by a few traders who speculated that subprime securities would lose value helped to compensate for $1.5 billion to $2 billion of losses elsewhere, the newspaper said. A Goldman spokesman declined to comment, according to the Journal.

BioMarin Pharmaceutical Inc. had its steepest gain since 2003, climbing $6.60, or 22 percent, to $36.36. The maker of treatments for rare disorders won approval from U.S. regulators to market a pill for a childhood disease that can cause mental retardation.