US stocks fall on economic worries, earnings jitters

NEW YORK: Stocks turned on lower Monday as investors reacted to cautious remarks about the U.S. economy by a Federal Reserve official and braced for the arrival of dismal second-quarter corporate earnings.

In a speech in San Diego, San Francisco Federal Reserve President Janet Yellen said that problems in the ailing housing market and banking system could cause the economy to get even worse before it recovers, according to media reports.

Yellen's comments took the wind out of a stock rally that was fueled by a pullback in oil prices. Oil fell at times fell by more than $5 a barrel as the dollar gained strength and as some market worries over the political tension in the Middle East appeared to dissipate.

But Wall Street, which has been hurtling stocks lower for the past few weeks, remains fearful that consumers faced with soaring energy prices are trimming spending in other areas. With consumer spending accounting for more than two-thirds of U.S. economic activity, a pullback could create sizable ripples.

Yellen's comments exacerbated those fears. Meanwhile, Wall Street is anxious for insights into how corporations are faring with rising in energy costs and the tight credit markets. Financial stocks faltered on Monday: Dow components American Express Co., Citigroup Inc., JPMorgan Chase & Co., and Bank of America Corp. all saw their shares fall. Aluminum producer Alcoa Inc. is set to start the earnings season when it reports results Tuesday.

In midday trading, the Dow Jones industrial average fell 55.93, or 0.50 percent, to 11,232.61, after rising by more than 100 points in earlier trading.

Broader stock indicators also gave up early gains. The Standard & Poor's 500 index fell 9.64, or 0.76 percent, to 1,253.26, and the Nasdaq composite index fell 9.80, or 0.44 percent, to 2,235.58.