A sharp rise in wholesale prices intensified fears about inflation today, sending stocks to a mixed finish and bond prices falling.
Blue chip stocks got a late boost from the pharmaceutical sector, but the major indexes finished the week with a loss.
Investors were surprised as a Labour Department report showed wholesale prices rising at the fastest rate in six years. While the Producer Price Index rose just 0.3 % in January, a drop in oil and food prices kept that figure artificially low.
With volatile oil and food removed, the ”core” PPI figure rose 0.8 % – a hefty one-month rise that could signal higher consumer prices down the road.
“Inflation-sensitive stocks are doing well, but that’s about it,” said Brian Pears, head equity trader at Victory Capital Management in Cleveland. “There’s not a lot of reason for people to make bets on too many other sectors.
But the Dow Jones industrials and large-cap stocks saw a boost in late trading as federal regulators approved the continued marketing of painkillers from Dow components Merck & Co. and Pfizer Inc., saying that the benefits for patients outweighed increased risks of heart attack and strokes.
The Dow rose 30.96, or 0.29 %, to 10,785.22. The Dow is once again up for the year to date – by just 2.21, or 0.02 %.
Broader stock indicators were narrowly mixed. The S&P was up 0.84, or 0.07 %, at 1,201.59, while the tech-focused Nasdaq composite index lost 2.72, or 0.13 %, at 2,058.62.
Inflation concerns kept the markets from substantially surpassing their December 2004 highs this week, as Federal Reserve Chairman Alan Greenspan, while giving lawmakers a bullish assessment of the economy, warned that higher prices could become an issue.
For the week, the Dow fell 0.1 %, the S&P 500 was down 0.34 %, and the Nasdaq dropped 0.87 %.
The US dollar got a small lift tody from the inflation data, shoring up modestly against the euro, the Japanese yen and the British pound, while gold prices slipped. The yield on the 10-year Treasury bond rose to 4.27 % as inflation fears caused a selloff in long-term bonds.
“Stocks are definitely seeing a hit from the bond trade,” said Russ Koesterich, US equity strategist for State Street Corp. in Boston. “With inflation worries picking up, it’ll be hard for this market to go higher as earnings growth decelerates and interest rates go up.”
A rise in oil prices also pressured stocks. A barrel of light crude was quoted at 48.35, up 81 cents, on the New York Mercantile Exchange.
A muddled trading session turned higher thanks to the Dow’s pharmaceutical components. Merck surged 3.76, or 13.03 %, to 32.61 after a US Food and Drug Administration advisory panel voted narrowly to allow Merck to continue marketing the arthritis drug Vioxx in the United States. The company voluntarily pulled Vioxx from the market last year after it was found to carry an increased risk of heart attack and stroke.
The FDA advisory panel also ruled that two of Pfizer’s pain relievers, Bextra and Celebrex, can remain on the market despite studies that questioned the safety of the drugs, which are chemically related to Vioxx. Pfizer gained 1.74 to 26.80.
A fresh round of merger news also helped investors overcome the economic data. Qwest Communications International Inc. was up 11 cents at 3.95 after the company said it would renew and possibly raise its bid for MCI Inc., hoping to break a 6.7 billion deal between MCI and Verizon Communications Inc. MCI rose 1.65 to 22.31, while Verizon slipped 37 cents to 35.31.
In earnings news, computer graphics chip maker nVidia Corp. climbed 2.76, or 10.82%, to 28.27 after seeing its quarterly profits double from a year ago thanks to new products for digital media devices and improved margins. nVidia beat analysts’ forecasts by 4 cents per share.
Options and futures contracts expired today, but the “triple witching day” that commonly causes increased volatility failed to stir the markets.
Declining issues outnumbered advancers by more than 4 to 3 on the New York Stock Exchange, where volume was heavy, thanks to the late surge in pharmaceuticals.
The Russell 2000 index of smaller companies was down 1.01, or 0.16 %, at 630.13.