US stocks close mixed

Stocks turned in a mixed performance today after a report showed that the nation’s manufacturing sector was expanding but facing even higher costs, triggering worries about inflation and rising interest rates.

The market made a brief advance in early trading, lifted by a combined 10 billion dollar worth of acquisitions from NRG Energy Inc. and R.H. Donnelley Corp., but retraced its steps as investors mulled the latest industrial data from the Institute of Supply Management.

While the report was better than expected and signalled that manufacturing has so far withstood the effects of hurricanes Katina and Rita, industrial companies reported another steep rise in raw materials prices last month amid record energy costs.

Price inflation is among the top reasons for the Federal Reserve to keep to its policy of raising interest rates.

The hurricanes are “not only creating shortages near term, but also will ultimately create a kind of vortex of demand that will be concentrated in the fourth and first quarters”, said Jack Ablin, chief investment officer at Harris Private Bank.

“There’s been concern that that will create inflation pressure for building materials.

“Any observer who thought there was light at the end of the Fed-tightening tunnel will be deeply disappointed,” he added, suggesting the Fed will hike interest rates again when it meets in November.

The Dow Jones industrial average dropped 33.22, or 0.31 percent, to 10,535.48.

Broader stock indicators ended mixed. The Standard & Poor’s 500 index was down 2.11, or 0.17%, at 1,226.70, while the Nasdaq composite index gained 3.74, or 0.17%, to 2,155.43.