NEW YORK — Wall Street resumed its retreat with another session of steep losses yesterday as declines in oil and gold prices did little to calm anxiety over inflation. The selloff erased the Dow Jones industrial average's gains so far in 2006.

Investors struggled to make sense of the Labor Department's May producer price index, which showed a mild uptick in wholesale prices but a stronger-than-forecast rise in inflation without food or energy costs. The data suggested that energy costs did not grow as much as expected, but the higher core prices nonetheless kept the market on edge.

While a downturn in commodities fed some hopes about easing inflation, persistent uncertainty about whether the Federal Reserve will continue boosting interest rates left investors unwilling to buy stocks amid fears of an economic crash.

"(The PPI data) was not conclusive enough to drive the market," said Rick Pendergraft, an equity trader for Schaeffer's Investment Research. If today's consumer price data comes in below or meets expectations, that might spark a rally following stocks' hefty slide over the past month, he said.

Wall Street's pullback trailed sharp losses on stock markets worldwide, which were driven by worries that a weakening U.S. economy will overturn other economies in its wake. The continued inversion of short- and long-term bond yields also was evidence of the market's expectations of an economic slowdown.

The Dow tumbled 86.44, or 0.8 percent, to 10,706.14, after losing nearly 100 points on Monday. The Dow is now down 0.11 percent for 2006.

Declining issues topped advancers by about 4 to 1 on the New York Stock Exchange, where consolidated volume of 3.37 billion shares led the 2.34 billion shares that changed hands Monday.

Overseas stock markets continued suffering from concerns that rising interest rates will lower U.S. demand for foreign-made products.

Japan's Nikkei stock average plunged 4.14 percent to a two-year low, and stocks in India slid 4.4 percent to a 52-week low.

However, today the Nikkei rebounded, rising 90.96 to 14,309.56. And Indian stocks rose 3 percent just in the first 10 minutes of trading.

Elsewhere overseas, Britain's FTSE 100 lost 1.8 percent, Germany's DAX index sank 1.92 percent and France's CAC-40 was lower by 2.24 percent.

The Labor Department's PPI report — seen as a precursor to consumer-level inflation — gave Wall Street a mixed reading on wholesale prices.

While overall PPI for May gained just 0.2 percent, core prices rose 0.3 percent to top economists' estimates of 0.2 percent.

But Ken McCarthy, chief economist for vFinance Investments, said the gain in core PPI was not a major concern since annual core inflation still stood at a mild 1.5 percent rate. He added that the PPI was less significant because it included only finished goods, while today's consumer price index would also account for services.

"It's encouraging that we're not seeing (the impact of energy costs) in core finished goods," McCarthy said. "But this is just the appetizer before tomorrow's main event."

Other data reinforced beliefs that soaring gas prices have begun to curb consumer spending.

The Commerce Department said May retail sales grew 0.1 percent after surging 0.8 percent in April; excluding automobiles, retail sales gained 0.5 percent.