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Stocks fell Wednesday after consumer prices showed a larger-than-expected increase in January, touching off concerns that inflation might not dissipate as Wall Street has hoped.
Only last week Wall Street cheered and logged sharp advances after Federal Reserve Chairman Ben Bernanke offered his assessment during Capitol Hill testimony that inflation appeared to be moderating as the economy was showing sustainable growth. Investors hope to gain insight into the central bank's recent thinking when minutes from the Fed's last meeting are released Wednesday afternoon.
The Labor Department report that the consumer price index rose 0.2 percent in January came as a surprise to Wall Street, which had expected an 0.1 percent increase. Declines in energy prices couldn't fully offset a rise in costs of medical care, food and airline tickets. The core figure, which excludes often volatile food and energy prices, rose a greater-than-expected 0.3 percent. The inflation news followed a profit report from Hewlett-Packard Co. that damped sentiment on Wall Street.
"We find it hard to see how the economy can continue to do well as it has without interest rates being under some upward pressure and if interest rates do stay where they are or in fact go down it's probably because the economy will slow down," said Denis Amato, chief investment officer at Ancora Advisors.
In late morning trading, the Dow Jones industrial average fell 62.89, or 0.49 percent, to 12,723.75.
Broader stock indicators were lower. The Standard & Poor's 500 index was down 4.78, or 0.33 percent, at 1,454.90, and the Nasdaq composite index fell 4.09, or 0.16 percent, to 2,508.95.
Bonds fell following the inflation data; the yield on the benchmark 10-year Treasury note rose to 4.70 percent from 4.68 percent late Tuesday. The dollar was mostly lower against other major currencies, though it rose against the yen after the Bank of Japan increased interest rates. Gold prices rose.
Light, sweet crude rose 51 cents to $59.36 per barrel on the New York Mercantile Exchange.
"The market has been in this Goldilocks phase where everything is perceived as positive," Amato said. "We have a hard time seeing how you could have steady-to-lower rates along with a good economy and better earnings."
In corporate news, Hewlett-Packard fell $1.83, or 4.2 percent, to $41.30 after the printer and computer maker saw inventories increase during its fiscal first quarter. Sales and profits topped Wall Street's forecasts for the quarter.
Pharmacyclics Inc. plunged $2.04, or 40.5 percent, to $3 after the pharmaceutical company said the Food and Drug Administration refused to review clinical studies of Xcytrin, an injection for treating lung cancer that has spread to the brain. The agency cited an improperly filed application, the company said.
Novastar Financial Inc. fell $6.90, or 39.3 percent, to $10.66 after the mortgage lender swung to a fourth-quarter loss from a profit as it booked charges for loans it expects borrowers with bad credit won't be able to repay. The company also said it might have to revoke its status as a real-estate investment trust, a vehicle that pays most of its taxable income to shareholders via a dividend.
FuelCell Energy Inc. jumped 23 cents, or 3.1 percent, to $7.76 after the maker of fuel cell power equipment expanded a manufacturing agreement with Posco Power, the largest privately controlled power producer in South Korea.
Declining issues outnumbered advancers by about 3 to 2 on the New York Stock Exchange, where volume came to 478 million shares.
The Russell 2000 index of smaller companies was down 1.04, or 0.13 percent, at 825.07.
Overseas, Japan's Nikkei stock average closed down 0.14 percent. In afternoon trading, Britain's FTSE 100 was down 0.84 percent, Germany's DAX index was down 0.55 percent, and France's CAC-40 was down 0.41 percent.
Published by Tim Paradis, AP Business Writer

Labels: FCEL, HPQ, inflation, NFI, PCYC

Wall Street will be awaiting fresh data on inflation and corporate earnings in the coming week as it looks to ride its fourth-quarter gains through the end of the year.
Recent findings indicating inflation remains in check have lent support to the markets and, along with strong corporate profits, has helped drive stocks higher.
This week brings data on inflation at the wholesale level and should give further insight into whether the Federal Reserve's plan to usher the economy toward a gentle slowdown is working. The central bank has left short-term interest rates unchanged at its last four meetings -- most recently, last Tuesday -- after raising them 17 straight times since 2004. The Fed has said it remains concerned about inflation and would therefor be unlikely to deliver the interest rate cut Wall Street has hungered for until it deems inflation is contained.

Labels: inflation, Wall Street

Stocks rose Tuesday after revised data showed wages and benefits increased at a much slower pace in the third quarter than had been estimated and an index of activity in the service sector came in above expectations.
Investors viewed the Labor Department as good news because concerns about inflation have eroded hopes that the Federal Reserve will start lowering interest rates next year. The central bank has said inflation remains its primary concern.
The Institute for Supply Management, a trade group, found activity in the nation's services sector rose at a faster rate in November. The reading of 58.9 was above the 57.1 seen in October.

Labels: inflation, Stocks, Wall Street

Inflation at the wholesale level plunged at a record pace in October, led by big declines in the price of gasoline and new cars.
Wholesale prices fell 1.6 percent last month, tying the record decline set in October 2001, the Labor Department reported Tuesday. It was the second consecutive big decrease, following a 1.3 percent fall in September.
Both months were heavily influenced by falling energy prices. But underlying inflation pressures were held at bay last month as well. Core inflation, which excludes energy and food, dropped by 0.9 percent, the biggest one-month fall in 13 years. That reflected big declines in prices for new cars and sport utility vehicles as dealers brought back sales incentives.

Labels: Core Inflation, inflation, wholesale prices

Wall Street is likely to focus on retail earnings and inflation and other data this week to get a read on whether the economy is slowing enough to stave off recession and prompt the Federal Reserve to eventually lower interest rates.
The market is coming off an erratic week that ended quietly as investors, having digested the election results, turned their attention to upcoming economic reports including minutes from the Federal Reserve's last meeting and the Labor Department's Producer Price Index.

Labels: inflation, Retail numbers, Wall Street