NEW YORK - Stocks edged lower with bonds today after another Federal Reserve official aggravated worries the central bank will raise interest rates next week to fight inflationary pressures. Dow drops 18.54
The Dow Jones industrial average bobbed above 7,300 for the first time, but ended the day with an 18.54-point loss to close at 7,274.21.
Decliners led advancers by an 8-to-7 margin on the New York Stock Exchange, with 1,164 up, 1,336 down and 872 unchanged. NYSE volume totaled 489.72 million shares vs. 459.14 million in yesterday.
Most broad measures also retreated after struggling to extend yesterday's rally, which boosted the Dow by 123 points to a record high.
The Standard & Poor's 500-stock list fell 4.53 to 833.13, and the NYSE composite index dropped 1.60 to 433.97. The Nasdaq index fell 10.60 at 1,333.59, but the American Stock Exchange composite rose 1.13 to 579.60.
The bond market initially provided some support for stocks after the Commerce Department reported that retail sales fell 0.3 percent in April, slightly more than expected and the biggest decline in 10 months.
The drop in retail sales bolstered the recent optimism that the economy's vigorous pace is easing enough to keep inflationary pressures under control without another boost in interest rates by the Federal Reserve.
Bonds quickly pulled back, however, after a Fed official reiterated concerns that consumer demand remains strong. Traders interpreted the remarks as a signal that the Fed will increase the central bank's key lending rates to slow the economy.
As bond prices fell today, the yield on the 30-year Treasury - a key determinant of borrowing costs - back toward 7 percent, a return considered enticing enough to draw investment money from stocks to bonds.
Stocks and bonds slid sharply in the early spring after the Fed nudged one of its rates higher for the first time in two years. But the markets have since rallied back amid hopes the central bank won't strangle the economy with a series of rate hikes.
Investors are now awaiting Wednesday's and Thursday's reports on wholesale and retail prices, the final clues on inflation before next Tuesday's Fed policy meeting.