Stocks close mixed amid inflation fears

NEW YORK » Wall Street gave up a big early advance and closed mixed yesterday after oil prices closed above $100 for the first time and stoked fears that inflation will stymie an already troubled economy.

Soaring oil prices could bring more problems for consumers, having already made many Americans shy about spending in recent months.

Consumer spending, a key driver of U.S. economic growth, has also been shaken by falling home prices and the volatile stock market.

The market was also concerned that rising inflation might make the Federal Reserve reconsider its bias toward lowering interest rates to help the economy. The central bank, which next meets March 18, last month slashed rates by 1.25 percent.

"I think there are still a lot of worries in the market that we have this stagnant growth in the economy and higher prices," said Richard Sparks, senior equities analyst at Schaeffer's Investment Research in Cincinnati.

Investors likely were positioning themselves ahead of a half-dozen economic reports that could give the market further direction. Paramount will be today's U.S. Labor Department report on consumer prices for January, which is a closely watched gauge for inflation. The Fed will also release minutes from its last meeting.

Meanwhile, new concerns that banks are facing more financial problems this year dragged the sector sharply lower -- and reminded investors that the credit crisis appears far from a resolution.

The Dow Jones industrial average fell 10.99, or 0.09 percent, to 12,337.22 after being up more than 150 points earlier in the session.

Broader indexes also moved lower. The Standard & Poor's 500 index fell 1.21, or 0.09 percent, to 1,348.78; and the Nasdaq composite fell 15.60, or 0.67, 2,306.20.

The Russell 2000 index of smaller companies rose 0.82, or 0.12 percent, to 702.34.

But advancing issues were ahead of decliners on the New York Stock Exchange by about 9 to 7, while on the Nasdaq Stock Market, decliners had a modest lead. Consolidated volume on the NYSE came to about 3.50 billion shares, compared to 3.36 billion on Friday.

Government bonds dipped as stocks gained. The yield on the 10-year Treasury note, which moves opposite its price, jumped to 3.87 percent from 3.77 percent late Friday. It rose to 3.90 percent in after-hours trading.

The dollar was mixed against most major currencies.

Light, sweet crude for March delivery rose $4.51 to settle at a record $100.01 a barrel on the New York Mercantile Exchange after earlier rising to $100.10, a new trading record. It was the first time since Jan. 3 that oil had been above $100.

Other commodities, including gold and soybeans, rose as well. At the pump, gas prices rose further above $3 a gallon.

Beyond inflation, investors also continued to worry about the financial sector. So far, global banks have written down more than $150 billion from bad bets on mortgage-backed securities -- and more losses are expected to the first quarter.