After Bernanke's Bump, Stocks Slump

Wall Street dropped today as investors were torn between troubling fears about inflation and more reassuring signs that the American economic downturn is nearing an end. The Dow Jones industrials, up modestly in earlier trading, fell more than 70 points.

The Federal Reserve Chairman, Ben Bernanke, reiterated expectations that the economy will rebound during the second half due to interest rate cuts, Fed loans to banks, and tax rebates. But, the Fed chief, in a speech via satellite to a conference at Barcelona, Spain, said the economy faces headwinds with rising prices for food and energy — a signal that interest rates will remain on hold.

Inflation-weary investors are wrangling with record oil and gasoline prices, which last month peaked at $135.09 a barrel. Though oil has since retreated, the fear is that higher energy costs are already hurting strapped consumers whose spending accounts for more than two-thirds of economic growth.

The market fluctuated for most of the session, but turned sharply lower in the afternoon.

The Dow fell 74.10, or 0.59%, to 12,429.72.

Broader market indexes were also lower. The Standard & Poor's 500 index dropped 4.03, or 0.29%, to 1,381.64; the Nasdaq composite fell 3.90, or 0.16%, to 2,487.63.