Stocks Tumble as Oil Tops $115 a Barrel

Stocks declined Tuesday as oil surged above $115 a barrel and an inflation report agitated a market already rattled by worries about the financial sector. Retail stocks also fell amid a weak outlook for consumer spending.

The Dow Jones Industrial Average was down about 100 points, or 0.9 percent. The S&P 500 and Nasdaq were off more than 0.8 percent.

Producer prices shot up 1.2 percent in July, double what was expected. Excluding volatile food and energy costs, core PPI rose 0.7 percent. Producer prices are up 9.8 percent from a year earlier, the highest since 1981. (Dig in to the numbers.)

"The producer price index increased much more than expected in July but the news is old news given the recent plunge in commodity prices," Tony Crescenzi of Miller Tabak pointed out in a note to clients.

Crude oil topped $115 a barrel as the dollar weakened. Analysts said traders were cashing in on profits from foreign-exchange trading amid the weakness in U.S. stocks.

Meanwhile, housing starts fell by 11 percent, slightly less than the 11.8-percent drop that had been expected. Building permits, a gauge of future building activity, fell by 17.7 percent.

Financials got clobbered again amid more dire forecasts for the sector. Analysts and economists say the year-old financial crisis -- is not only far from over but -- could actually get much worse.

The latest comment to rattle the market came from IMF chief economist Kenneth Rogoff, who said a large U.S. bank will fail in the next few months.

Financials, including AIG and American Express , were among the biggest drags on the Dow.

Fannie Mae and Freddie Mac started the day higher but quickly succumbed to the selling pressure.

Even the big brokerage firms were hit: Lehman Brothers was off nearly 5 percent, while Morgan Stanley and JPMorgan were off more than 3 percent.

Earnings today were all about the retail and it was a mixed bag: Home Depot and Target beat expectations, while Staples and Saks missed their targets.

Home Depot's quarterly profit topped forecasts as consumers took on summer renovation products during what is typically the strongest quarter for the home-improvement retailer. However, same-store sales fell 7.9 percent and Home Depot said it still expects a 24-percent drop in full-year profit.

The results come a day after rival Lowe's reported it surpassed profit and sales expectations, helped by the tax-rebate checks. The company also sees a slowdown in the second half but raised its full-year outlook due to the robust second-quarter results.

Target also exceeded expectations but same-store sales slipped amid a strong year-earlier comparison and the cheap but chic retailer is working on strategies that focus more on the cheap than the chic to keep up with rival Wal-Mart .

Staples said its second-quarter sales were less than expected due to a 7 percent drop in North American business.

Saks