Dow drops as CPI gains
NEW YORK (Reuters) - U.S. blue-chip stocks fell on Wednesday after stronger-than-expected inflation data stirred interest-rate worries. But the Nasdaq ended at a six-year high
as investors snapped up Apple Inc. and other recently pummeled technology shares, believing the sector may offer the best earnings growth.
Shares of Hewlett-Packard Co. were the top drag on the blue-chip Dow average and the broad Standard & Poor's 500 after the printer and personal computer maker failed to impress investors with its latest earnings report, which was released late on Tuesday.
"We're kind of having the worst of all worlds: We had a surprise increase in the CPI, amid weakening in housing and manufacturing," said Hugh Moore, a partner with research-based advisory firm Guerite Advisors in Greenville, South Carolina. "Nobody wants to talk about stagflation, but the market seems like it doesn't know which way to turn."
The Dow Jones industrial average fell 48.23 points, or 0.38 percent, to end at 12,738.41 -- a day after it closed at yet another record. Wednesday's decline snapped a five-day streak of gains for the Dow. The Standard & Poor's 500 Index dipped 2.05 points, or 0.14 percent, to finish at 1,457.63. But the Nasdaq Composite Index rose 5.38 points, or 0.21 percent, to 2,518.42, its highest close since March 2001.
After the closing bell, shares of Wild Oats Market shot up nearly 17 percent to $18.35 after rival Whole Foods Market Inc. made a bid for the smaller organic grocer. Wild Oats shares closed on Nasdaq at $15.72, while Whole Foods Market's stock ended at $45.70.
STRONG CPI COOLS RATE-CUT CHANCES
Earlier in the day, U.S. interest-rate futures fell after government data showed the core Consumer Price Index, excluding food and energy, rose more than expected last month. That suggested traders see a rate cut in the third quarter as less likely.
Later in the session, minutes from the Federal Reserve's January 30-31 policy-making meeting showed "participants did not yet see a downward trend in core inflation as definitively established," adding to the view that chances of a rate cut were waning.
Banks and other interest-rate-sensitive shares were some of the biggest decliners in the Dow and the S&P 500. Adding to the downward bias were the woes of mortgage companies that lend to the riskiest borrowers.
NovaStar Financial Inc. plummeted 42.5 percent, or $7.46, to $10.10 and ranked as the biggest percentage loser on the New York Stock Exchange, a day after the company, which supplies mortgages to people with weak credit, said it expects to have little or no taxable income in coming years.
Shares of Citigroup declined 0.8 percent, or 44 cents, to $53.75 on the New York Stock Exchange, while Countrywide Financial Corp., the No. 1 U.S. mortgage lender, fell 2.3 percent, or 95 cents, to $40.69.
HP DISAPPOINTS, BUT APPLE SHINES
Hewlett-Packard led declines among blue-chip stocks a day after the computer and printer maker posted a quarterly profit that beat estimates. But investors took a dim view of its ability to sustain the pace of profit growth.
HP shares fell 4.7 percent, or $2.03, to $41.10 on the New York Stock Exchange for the biggest daily percentage drop in five months.
The Nasdaq managed to cut its earlier losses and end Wednesday's session with a gain, supported by investors' appetite for tech bellwethers, including Apple, up 3.8 percent, or $3.30, at $89.20. Apple was among the recently beaten-down technology names that investors snapped up in Wednesday's session.
Trading was moderate on the NYSE, with about 1.43 billion shares changing hands, below last year's estimated daily average of 1.84 billion, while on Nasdaq, about 2.08 billion shares traded, slightly above last year's daily average of 2.02 billion shares.
Declining stocks outnumbered advancing ones by a ratio of about 6 to 5 on the NYSE. On the Nasdaq, things were more evenly matched, with 1,526 shares rising and 1,485 issues declining.
