Drop in gas prices fails to ignite stocks
NEW YORK » Stocks slogged through a disappointing session yesterday, with equities modestly lower as investors consolidated their holdings despite solid corporate earnings reports and the biggest drop in consumer prices in 56 years.
Tumbling gasoline prices pushed November's consumer price index down 0.6 percent, the biggest one-month decline since July 1949, according to the Labor Department. Investors considered the drop a good omen for the holiday shopping season. Core CPI, with food and fuel prices removed, rose a modest 0.2 percent, in line with economists' forecasts.
With the Federal Reserve closely watching inflation, the CPI figures bode well for future interest rates. "This gives the Fed a lot more flexibility, a little more elbow room in figuring out when to stop raising rates," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago. "Continuing stable inflation figures like the ones we saw today helps everybody."
Yet investors remained unconvinced, selling off riskier small-cap stocks, along with technology and energy shares that led the November rally, and moving to larger, more established companies -- apparently hedging their bets against Wall Street's now-traditional January letdown.
The Dow Jones industrial average fell 1.84, or 0.02 percent, to 10,881.67.
Broader stock indicators also moved lower. The Standard & Poor's 500 index dropped 1.80, or 0.14 percent, to 1,270.94, and the Nasdaq composite index lost 1.96, or 0.09 percent, to 2,260.63.
Bonds moved lower, with the yield on the 10-year Treasury note rising to 4.47 percent from 4.45 percent late Wednesday. Oil prices fell below $60 per barrel, with a barrel of light crude settling at $59.99, down 86 cents, on the New York Mercantile Exchange.
Inflation remained on the minds of many investors. Core CPI continued to rise, and energy prices are still at historically high levels for this time of year.
"We're not out of the woods on some of these inflationary pressures," said Jack Caffrey, equities strategist at J.P. Morgan Private Bank. "And with it being the end of the year, you have some selling going on before liquidity dries up before the holidays."
A slight rise in first-time jobless claims also may have dampened some of the enthusiasm. First-time unemployment filings rose to 329,000 last week, more than the 320,000 new claims economists expected. The rate of unemployment claims is still considered consistent with decent employment growth.