Falling oil prices offset
worries about inflation

NEW YORK » Stocks wobbled to a mixed finish yesterday as dramatically lower oil prices offset a government report that offered new evidence of rising inflation.

The Labor Department's reading of its Consumer Price Index showed a higher-than-expected 0.4 percent rise for February, adding to inflation concerns raised by Federal Reserve policy-makers on Tuesday. It was the last thing investors wanted to see, but the sharp drop in oil and the fact that much of Wall Street's inflation fear had been priced into stocks during the previous session kept the market from posting precipitous declines, analysts said.

"Probably the most important factor today is energy," said Arthur Hogan, chief market analyst at Jefferies & Co. "If we had this move in the commodity in a vacuum, I think we would have a market that was up a couple hundred points. The CPI is keeping that from happening, but the good news is we're not selling off."

The Dow Jones industrial average finished down 14.49, or 0.14 percent, at 10,456.02, after edging in and out of positive territory for much of the day. The Dow fell 94.88 Tuesday amid growing inflation concerns.

The broader gauges eked out small gains. The Standard & Poor's 500 index closed up 0.82, or 0.07 percent, at 1,172.53. The Nasdaq composite index added 0.88, or 0.04 percent, to 1,990.22. One of the brightest spots in the market was the chip industry; the Philadelphia Semiconductor Index rose 1.16 percent.

Oil dropped $2.22 to $53.81 per barrel on the New York Mercantile Exchange, as a weekly government report showed a larger than expected build in crude supplies. Gold dropped more than $6 to $425.20, and the U.S. dollar rose sharply against other major currencies following the Fed's decision Tuesday to raise short-term interest rates by another quarter-point to 2.75 percent.

The increase in the consumer price index, the government's most closely watched inflation barometer, came after prices edged up by just 0.1 percent in January. Economists had forecast a 0.3 percent rise. Although sharp increases in energy costs -- including gasoline -- led the way in February, many other prices, including those for airfare, medical care, and education, also went up. The "core" CPI, which excludes energy and food, rose 0.3 percent, its largest increase since September.

"I think the Fed got a chance to review the CPI numbers yesterday, so I think that was baked into their actions already," said Jack A. Ablin, chief investment officer at Harris Private Bank. "Still, this is the worst (CPI) report we've seen for six months. Core is up 2.4 percent year-over-year, and it's ratcheting higher and creating concern."