Inflation fears trump
solid economic news

NEW YORK » Nagging worries about inflation bogged down Wall Street yesterday, with investors sending stocks lower as they tried to reconcile solid economic and earnings news, reports of anthrax discovered at the Pentagon, and a gloomy outlook on semiconductor stocks.

Concerns that higher oil prices, which topped $55 per barrel, would accelerate inflation and lead to rising interest rates eroded investor confidence, and the Pentagon's announcement about an anthrax discovery in its mailroom added to the general unease. The tech sector was hit particularly hard after a Merrill Lynch analyst said growth in chip stocks would be stalled for much of the year.

That made it difficult for Wall Street to rise on good news from the retail sector. While the 0.5 percent growth in February retail sales fell slightly below Wall Street expectations, the Commerce Department revised its January figure upward, and auto sales were surprisingly strong in both months. Record earnings from Lehman Brothers Holdings Inc. were likewise discounted by midday, when stocks turned firmly negative.

"There's not enough positive news to get investors to commit to new positions at this point," said Michael Sheldon, chief market strategist at Spencer Clarke LLC. "There's a malaise hanging over the market right now without much of a catalyst to move higher."

The Dow Jones industrial average fell 59.41, or 0.55 percent, to 10,745.10.

Broader stock indicators also lost ground. The Standard & Poor's 500 index was down 9.08, or 0.75 percent, at 1,197.75, and the tech-focused Nasdaq composite index, hurt by the Merrill Lynch report, lost 16.06, or 0.78 percent, to 2,034.98.

All three major indexes finished at or near their lows for the session.

Oil prices rose as investors worried that OPEC may not follow Saudi Arabia's lead and increase oil production. A barrel of light crude settled at $55.05, up 10 cents, on the New York Mercantile Exchange.

The bond market slipped lower, with the yield on the 10-year Treasury note rising to 4.54 percent from 4.51 percent late Monday. Gold prices fell slightly, while the dollar rose against the euro and was mixed against other major currencies.

Wall Street paid close attention to Federal Reserve Chairman Alan Greenspan's testimony on Capitol Hill, hoping to hear his latest views on inflation and interest rates. Greenspan, whose topic yesterday was Social Security, warned that federal budget deficits, not inflation, remained the greatest threat to the economy.