A late selloff left US stocks modestly lower today as weakening consumer confidence and a rise in wholesale prices prompted investors to take profits and put the brakes on Wall Street’s recent rebound.
The market’s losses were also fed by soaring energy prices and a meagre profit forecast from Dell. But the upswing in the producer price index – seen as a precursor to consumer-level inflation – once again sparked concerns about more interest rate increases, a day after one Federal Reserve member said the central bank was nearing an end to its string of rate hikes.
“The PPI number is one data point that suggests the Fed is going to go further,” said Russ Koesterich, senior portfolio manager at Barclays Global Investmets. With six weeks before the next Fed policy meeting, “the market is going to pay increasing attention to the implication of (economic) data for inflation.”
Investors digested a 0.3% rise in January’s PPI, which grew faster than economists’ 0.2% target. Core PPI, excluding volatile energy and food prices, added 0.4%, the Labour Department said.
The Dow fell 5.36, or 0.05%, to 11,115.32, after losing as much as 42 points earlier.
The broader stock indicators also declined. The Standard & Poor’s 500 index lost 2.14, or 0.17%, to 1,287.24, and the Nasdaq composite index slid 12.27, or 0.53%, to 2,282.36.
Bonds rose, with the yield on the 10-year Treasury note falling to 4.54% from 4.59% on Thursday. The dollar was mostly lower against most major currencies, while gold prices advanced.
Crude futures rallied on threats of political unrest in oil-rich Nigeria, sending a barrel of light crude up US$1.42 (€1.19) to settle at US$59.88 (€50.18) on the New York Mercantile Exchange.
Today’s decline was a respite from this week’s run-up, which carried the Dow Jones industrials about 200 points higher to close at a fresh 4-year high yesterday. For the week, the Dow rose 1.8%, the S&P 500 added 1.6% and the Nasdaq was up 0.91%.
Whether stocks can continue moving higher is largely pegged on the Fed’s opinion of the economy and inflation, Koesterich said, adding that he was monitoring Wall Street’s reaction to lower oil prices and the effect of last month’s unseasonable weather.
“Things have been very distorted by how warm the weather was in January,” Koesterich said. “We’re trying to get a handle on how it impacted the economy. It helped retail spending and housing starts, but has hurt energy prices.”
More dampening economic news came from the University of Michigan, which said its consumer-sentiment index for February tumbled 3.8 points to 87.4, well below the consensus estimate of 91.
Dell said its fourth-quarter profit surged 52% on computer sales to businesses and overseas customers, but a weak first-quarter outlook prompted Banc of America to lower its rating to “neutral” and sent shares sliding 1.58 to 30.38.
Sirius Satellite Radio posted a threefold jump in quarterly revenue on strong subscriber growth, but its deficit widened as customer-acquisition spending more than doubled. Sirius lost 39 cents to 5.26.
Time Warner fell 19 cents to 17.78 following The Wall Street Journal’s report that billionaire financier Carl Icahn has shelved plans to split up the media conglomerate after failing to garner shareholder support.
KeySpan confirmed a New York Times report that it has put itself up for sale. The natural gas utility is seeing bids for more than US$6.5bn (€5.45bn) and interest from Consolidated Edison and London’s National Grid could start a bidding war, according to the Times. KeySpan jumped 4.23 to 40.41.
The market reversed course at midday, with advancing issues overtaking decliners by 9 to 7 on the New York Stock Exchange. NYSE volume of 1.57bn shares lagged the 1.66bn shares traded on Thursday. Trading activity slowed toward the end of the session as traders left early for the President’s Day weekend. US stock markets will be closed on Monday for the holiday.
The Russell 2000 index of smaller companies fell 0.98, or 0.13%, to 730.94.