NEW YORK — Surging oil prices and worrisome inflation data are raising doubts about the durability of the stock market's 10-week-old recovery.
The Dow Jones industrial average tumbled nearly 200 points Tuesday as crude oil shot above $129 a barrel to another record and April wholesale inflation clocked in at twice the level expected by economists, renewing fears about the ability of consumers to lift the economy out of the doldrums.
Investors also were spooked by weak earnings at Home Depot and an influential stock analyst's prediction that the credit crisis could afflict Wall Street firms well into 2009.
The market's recent rally -- in which the Dow climbed nearly 1,300 points from March 10 to Monday -- has been paced by signs that the economy could weather the housing dive and credit crunch with only moderate damage and limited layoffs.
And the Federal Reserve's interest rate cuts and the government's economic stimulus package have raised hopes that growth will pick up in the second half of the year.
But continued inflationary pressures, coupled with the downbeat retailing news, raise the specter that corporate profits will remain subdued as price hikes intensify. Investors fear a so-called double dip, in which the market's advance proves to be only a respite before the resumption of a bear market.
"The problem is now we're in phase two of this credit crisis, which is the real-world economic impact," said Peter Boockvar, equity strategist at New York brokerage house Miller Tabak & Co. "Companies are saying things aren't getting any better. The economy is remaining sluggish."
Bulls counter that the market was poised to give back some gains and that inflationary concerns are overdone.
"This isn't the-tip-of-the-iceberg kind of stuff," said Art Hogan, chief market strategist at Jefferies & Co. "This is more a low-volume sell-off with a couple of negative catalysts after a pretty good run in the market."
The Dow sank 199.48 points, or 1.5%, to 12,828.68. The Standard & Poor's 500 index slid 13.23 points, or 0.9%, to 1,413.40.
The Nasdaq composite index fell 23.83 points, or 1%, to 2,492.26.
Crude futures jumped $2.02 to $129.07, a record close, on the New York Mercantile Exchange after peaking at $129.60. Oil is up 35% this year and has nearly doubled in the last 12 months.
