Stocks Mixed on Inflation Fears
Rising wholesale prices and a jump in oil futures intensified inflation fears Friday, sending bond yields higher and keeping stocks mixed.
The economic news bolstered the view that the Federal Reserve would keep increasing its benchmark interest rate to contain inflation, which erodes the value of bond interest payments.
Bond yields and prices move in opposite directions. The yield on the benchmark 10-year Treasury note shot up to 4.27% from 4.18% on Thursday.
The Labor Department’s report showed wholesale prices excluding food and energy climbing at the fastest rate in six years, pressuring stocks and bonds.
“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.”
Even so, 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 and Pfizer, saying that the benefits for patients outweighed increased risks of heart attack and strokes.
The Dow rose 30.96 points, or 0.3%, to 10,785.22. The Dow is once again up for the year to date -- by just 2.21 points, or 0.02%.
Broader stock indicators were narrowly mixed. The Standard & Poor’s 500 was up 0.84 points, or 0.07%, at 1,201.59, while the tech-focused Nasdaq composite index lost 2.72 points, or 0.1%, at 2,058.62.
Declining issues outnumbered advancers by nearly 8 to 5 on the New York Stock Exchange. Quarterly options and futures contracts expired Friday, but the “triple witching day” that commonly causes increased volatility failed to stir the markets.
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 0.3% and Nasdaq lost 0.9%.
The U.S. dollar got a small lift from the inflation data, shoring up modestly against the euro and the Japanese yen while gold prices slipped. Oil rose 81 cents a barrel to $48.35.
In other market highlights:
* Merck surged $3.76 to $32.61 for the biggest gain in the Dow average and the S&P; 500. The company’s Vioxx painkiller, withdrawn Sept. 30, may be sold again in the U.S. with the strictest safety warning on its label, a government advisory panel ruled.
Pfizer added $1.74 to $26.80 after the panel said its Celebrex treatment, the world’s best-selling prescription arthritis drug, should carry U.S. regulators’ stiffest label warning that the medication elevates the risk of heart attacks and strokes.
* Energy stocks rose on higher oil prices. Exxon Mobil climbed $1.28 to $59.41, lifting its market value to $383.3 billion and surpassing General Electric, which fell 15 cents to $35.88, as the largest U.S. company by market value. ChevronTexaco gained $1.12 to $59.73, and Occidental Petroleum climbed $1.96 to $67.87.
* Takeover talks lifted MCI and May Department Stores.
MCI, which agreed to be bought by Verizon Communications, added $1.65 to $22.31 after Qwest Communications International said it might boost its $8-billion takeover offer for MCI. Verizon lost 37 cents to $35.31, and Qwest gained 11 cents to $3.95.
May advanced $1.93 to $33.45 on a Wall Street Journal report that Federated Department Stores has resumed talks to acquire May. Federated, owner of the Macy’s and Bloomingdale’s chains, slipped 65 cents to $56.72.
* Computer graphics chip maker NVidia climbed $2.76 to $28.27 after seeing its quarterly profit double from a year earlier.
