New York Wall Street took a sharp downward turn Tuesday as investors interpreted a big jump in retail sales as a harbinger of an earlier-than-expected rise in interest rates. The Dow Jones industrial average gave up early gains, falling more than 130 points by the close.
The selloff was spurred by the Commerce Department's report of a 1.8 percent increase in retail sales for March, the biggest jump in a year. It was three times greater than the 0.6 percent increase economists expected.
That raised the specter of inflation, and investors worried that the Federal Reserve soon would raise interest rates to keep the economy from growing too fast.
A raise before year's end could put President Bush's re-election into question, according to Hugh Johnson, chief investment officer at First Albany Corp.
"That worries investors that we're going to see a Democratic administration, which might roll back the 15 percent tax rate on capital gains and dividends," Johnson said. "It's a whole string of dominoes. If this weren't an election year, you'd see earnings and economics outweigh the interest rate concerns."
While the retail data helped the markets open higher, the major indexes quickly slipped into negative territory and fell sharply in afternoon trading. The Dow was off 134.28, or 1.3 percent, at 10,381.28. It was the biggest one-day drop for the Dow since March 25.
Broader stock indicators also dropped. The Standard & Poor's 500 index was down 15.76, or 1.4 percent, at 1,129.44, also the worst point loss since March 25.
The Nasdaq composite index fell 35.40, or 1.7 percent, to 2,030.08, the Nasdaq's biggest loss since April 2.