Stocks slide as gold and oil surge

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.

At the close of trading, the Dow Jones industrial average dropped 63.87 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.

Microsoft, one of the 30 Dow stocks, fell 23 cents to close at $26.84 a share. Boeing, also a Dow stock, sank 58 cents to $82.35.

Broader stock indicators were also lower. The Standard & Poor's 500 index fell 3.79 to 1,285.33, and the Nasdaq composite index sank 14.95 to 2,311.16.

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 soared past $600 an ounce to 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 Investors.

"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.

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.

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.

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."