Morning Recap

NEW YORK (MarketWatch) -- Stocks fell sharply on Tuesday, as crude oil futures topping $129 fueled concerns that surging commodities prices will further crimp U.S. consumption, while an official signaled the central bank may be done with cutting interest rates to boost the economy.

"The number one concern in everyone's mind is higher oil prices," said Robert Pavlik, chief investment officer at Oaktree Asset Management. "Investors are questioning whether the rally we've had [over the past two months] is sustainable, with concerns about energy and remaining problems in the financial industry."

Oil surged to a new record of $129.46 a barrel, with bullish calls by investments banks, weakness in the dollar and supply concerns fueling the gains.

The Dow Jones Industrial Average was off 195 points, or 1.5%, at 12,834, with 27 of its 30 components in the red. Leading blue-chip decliners were financial stocks American Express , AIG , Citigroup , and JP Morgan Chase .

Pressuring financial-related stocks, the vice-chairman of the Federal Reserve signaled the central bank has stopped cutting interest rates for now.

Chevron and Exxon Mobil were among the few rising stocks on the Dow.

The S&P 500 index fell 12 points, or 0.9%, to 1,413, with the consumer discretionary sector, off 1.9%, leading the drop, closely followed by financials, off 1.8%, and technology off 1.5%.

Hewlett-Packard , a blue-chip stock, fell 1% ahead of posting delayed results after the close.

"Techs are considered by many as consumer discretionary," said Oaktree's Pavlik.

The Nasdaq Composite lost 29 points, or 1.2%, to 2,486.

Before the market opened, inflation concerns were fueled by a report showing wholesale prices outside of food and energy rose the most in around 17 years. Core producer prices, which exclude food and energy, rose a higher-than-expected 0.4% in April, or 3% year-on-year -- the fastest rise since late 1991. See full story.

Highlighting woes about U.S. consumers and the economy, Home Depot said its profit dropped 66% and said the housing and home improvement markets remained difficult in the first quarter. "In fact, conditions worsened in many areas of the country," CEO Frank Blake said.-
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