NEW YORK - Wall Street pitched lower for the second straight session yesterday as record-high oil prices and a bleak economic assessment from the Federal Reserve deepened investors' worry about rising costs and a shaky employment picture. The Dow Jones industrial average fell 227 points, logging its widest two-day loss since late February.

Early in the day, stocks began falling on the surging price of oil, which shot up more than $4 and breached $134 a barrel for the first time on the futures market yesterday.

The stock market slumped further after minutes from last month's Fed meeting revealed that, while policymakers expected sharply lower economic growth and higher unemployment later this year, inflationary risks are likely to keep the central bank from cutting rates again. Lower interest rates spur economic growth, but they also tend to accelerate inflation.

The Dow fell 227.49, or 1.77 percent, to 12,601.19, after falling nearly 200 points Tuesday. The Standard & Poor's 500 index fell 22.69, or 1.61 percent, to 1,390.71, while the Nasdaq composite index fell 43.99, or 1.77 percent, to 2,448.27.

Crude oil soared $4.19 to settle at $133.17 a barrel on the New York Mercantile Exchange - about $20 higher than it was at the beginning of May. It passed $134 a barrel in after-hours trading.

Strong demand from China, supply disruptions in Nigeria, the dollar's slump vs. other world currencies, and political tension in the Middle East have been keeping oil on the incline.

"The factors affecting commodities, the strongest catalysts, are outside the United States," Quincy Krosby, chief investment strategist for The Hartford, said. "The Fed's ability to dampen inflationary expectations have become not completely limited, but more limited than if we were having this discussion 10 years ago."

The airline industry has been particularly slammed by the rising cost of oil. Citing high fuel prices, American Airlines said yesterday that it would start charging $15 for the first checked bag, reduce domestic flights, and cut perhaps thousands of jobs. AMR Corp. shares fell $1.98, or 24.15 percent, to $6.22.

And although jitters over the housing-driven credit crisis have calmed since March, they are far from over. Financial stocks took a hit yesterday after Moody's Investors Service said it was "conducting a thorough review" regarding the possibility that computer errors incorrectly gave high-quality ratings to certain debt securities that later sank in value.

Among the financial-services companies in the Dow, Bank of America Corp. fell 76 cents, or 2.15 percent, to $34.63; JPMorgan Chase & Co. fell $1.28, or 2.93 percent, to $42.42; Citigroup Inc. fell $1.05, or 4.75 percent, to $21.06; and American Express Co. fell $1.83, or 3.87 percent, to $45.48.

Because of the credit crisis, the financial sector no longer is the largest in the S&P 500 index. Financials have been overtaken by the information-technology sector, which S&P analysts said has not happened since 2002.