After taking the long weekend to think things over, investors apparently decided that repeated warnings from the Federal Reserve about the prospect for higher interest rates is bad news for stocks.
Investors sent U.S. shares lower across the board Monday. The Dow fell 75.37 to close at 10,334.73, a three-quarters-of-a-percent drop.
The Nasdaq took an even bigger hit, losing 29.88 points, or 1.49 percent, to close at 1,969.99. The small-cap S&P 500 also took a nearly 1 percent hit, falling 11.21 to 1,125.26.
Leading the decline were stocks such as Intel, which shed 2.4 percent as all chip stocks went lower, and General Motors, which tumbled 2.1 percent after acknowledging difficulty in turning around European operations.
The downward move came after a nearly week-long series of warnings about interest rates from members of the Fed and just ahead of key government numbers that should help clear up the inflation question.
On Tuesday, the Consumer Price Index (CPI) for May will be released. The wholesale-level Producer Price Index (PPI) was due out last week but was delayed because of computation problems, and may be released Tuesday as well.
The markets were already chewing over two big pieces of data released Monday.
The Commerce Department said retail sales rose 1.2 percent in May and that the U.S. trade deficit grew sharply in April to record levels as U.S. consumer demand for foreign goods, including cars and oil, revved up.
Waiting for Greenspan
The sell-off came after three weeks of modest but steady gains made largely on the strength of upbeat earnings outlooks for U.S. companies.
Markets might remain jittery about interest rates until the Federal Reserve holds its next meeting, scheduled for June 29th and 30th.
In the absence of actual action by the Fed, the stock and bond market and the U.S. dollar all have fluctuated on the basis of comments from Fed Chairman Alan Greenspan and others.
Investors might be nervous about the Fed having signaled its willingness to raise rates more quickly than it has in the past if necessary.