Star-Bulletin news services
Stocks turn lower
on inflation fears
NEW YORK >> Uncertainty gripped Wall Street yet again yesterday as investors, forsaking an early advance, gave in to inflation fears and sent stocks generally lower. Only the tech-focused Nasdaq composite index posted a marginal gain.
With the market already alarmed at the prospect of an interest rate hike next month, the government's report of a higher-than-expected increase in wholesale prices raised concerns that the Federal Reserve might raise interest rates by more than the quarter percentage point Wall Street has expected.
A late-morning rally showed signs of life for stocks, but pessimistic investors quickly took advantage of the short-lived rise to lock in what gains they could.
"We had a really nice rally yesterday, but technically, the market doesn't look all that great," said Todd Leone, managing director of equity trading at SG Cowen Securities. "I think we'll be in a lower range for a while. We might see a rally when the Fed finally raises rates, actually."
Declining issues were just about even with advancers on the New York Stock Exchange, where consolidated volume came to 1.79 billion shares, compared to 2.10 billion on Wednesday.
The Dow Jones industrial average was down 34.42, or 0.3 percent, at 10,010.74.
Broader stock indicators were narrowly mixed. The Standard & Poor's 500 index lost 0.84, or 0.1 percent, to 1,096.44, and the Russell 2000 index of smaller companies slipped 1.82, or 0.3 percent, to 547.17. But the Nasdaq was up 0.44 at 1,926.03.
The price of the Treasury's 10-year note closed down 5/16 point, while its yield rose to 4.85 percent from 4.81 percent yesterday. Two-year Treasury notes fell 3/32 point and yielded 2.64 percent, up from 2.60 percent yesterday.
The Labor Department said wholesale prices climbed 0.7 percent in April, the largest increase in a year, spurred on by higher dairy and gasoline prices. However, excluding food and energy prices, "core" wholesale prices rose by only 0.2 percent, matching economists' estimates.
A drop in retail sales in April, as reported by the Commerce Department, was no help to the markets. Sales fell 0.5 percent, bogged down by lagging auto sales. Analysts had expected a modest 0.1 percent rise in sales.
In addition, new applications for unemployment benefits rose last week by 13,000 to 331,000, according to the Labor Department. The increase, while larger than expected, still suggested the job picture is improving, which has been a key factor in the Fed's interest rate deliberations.
"All that data added up to a mixed bag," said Bryan Piskorowski, market analyst at Wachovia Securities. "The consumer prices might give us better direction on Friday, but until then, we're going to keep bouncing around here. We're in the badlands, and we'll stay there until the Fed acts."
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