Wall Street continued to decline yesterday, after the US government reported worse-than-expected wholesale inflation and as investors worried that financial firms may post more losses.

The US Labor Department reported that wholesale prices surged 1.2 percent in July. The increase was more than double the 0.5 percent gain that economists had expected. Core prices, excluding food and energy, rose 0.7 percent, the biggest since November 2006.The market had expected the 0.2 percent rise in core prices. Investors worried that the rising prices would weigh on the US economy.

Meanwhile, the US Commerce Department said construction of homes and apartments fell in July to the lowest level in more than 17 years. Centex Corp. and Pulte Homes Inc. sent homebuilder shares lower.

American International Group, the world's largest insurer, fellnearly 6 percent, as Goldman Sachs said it is "increasingly likely" that AIG will have to raise more capital. Moreover, JPMorgan Chase predicted that Lehman Brothers may write down about US$4 billion in the third quarter. Lehman tumbled 13 percent.

Saks Inc. reported a wider-than-expected loss in the second quarter and a downbeat forecast for the year. The luxury goods retailer dropped as much as 14 percent.

The Dow Jones fell 130.84, or 1.1 percent, to 11,348.55. Broader indexes also traded lower. The Standard & Poor's 500 index dipped 11.91, or 0.9 percent, to 1,266.69; and the Nasdaq fell 32.62, or 1.4 percent, to 2,384.36.