Jump in Inflation Weighs on Stocks

Wall Street tried but failed to overcome disappointment over a jump in inflation Friday, closing moderately lower despite assurances by Federal Reserve Chairman Alan Greenspan that the job market would improve. The major indexes all ended the week with losses, and the Nasdaq composite index was down for the fifth straight week.

U.S. Treasury prices also slid, sending yields, which move in the opposite direction, up for the day. The benchmark 10-year Treasury note saw its yield rise to 4.10% -- its highest level for a week and a half -- from 4.03% on Thursday.

The dollar hit two-month highs against the yen after security was tightened in Japan to thwart any possible terrorist activity. The greenback also notched a two-week peak against the euro in a broad rally versus major currencies.

Stocks started lower after a government report showed a sharp increase in prices for gasoline and other energy products in January, while the cost of other consumer goods remained relatively stable. In the afternoon, Greenspan’s statement revived stocks briefly but the selling continued.

The Dow Jones industrial average finished down 45.70 points, or 0.4%, at 10,619.03. It had lost nearly 80 points earlier in the session.

Broader stock indicators were narrowly lower. The Standard & Poor’s 500 index lost 2.95 points, or 0.3%, to 1,144.11, while the Nasdaq composite index was off 8.03 points, or 0.4%, at 2,037.93.

Nasdaq, which has suffered the brunt of the market’s uneven trading of recent weeks, slipped 0.76% for the week. The Dow was down 0.08%, and the S&P; 500 was off 0.15%; both indexes had gains during the previous week.

Declining issues outnumbered advancers by nearly 2 to 1 on the New York Stock Exchange.

The consumer price index rose 0.5%, higher than analysts had expected. But excluding energy and food prices, which often vary widely from month to month, the closely watched core rate of inflation rose 0.2%.

The report prompted investor concern about whether the rising prices might make the Fed more inclined to raise interest rates, especially because the central bank is no longer saying it expects to keep rates low for, in its words, “a considerable time.�

The uncertainty on Wall Street was fanned by the Japanese government’s decision Friday to raise its terrorism alert to its highest level, which sent the dollar up against the yen. And a cautious assessment of business conditions Thursday by Hewlett-Packard also prompted some selling as investors locked in their profits, market analysts said.

The decline, though, may be less a reaction to the report on consumer prices than a sign of investor reluctance to bid up technology stocks as the Nasdaq index nears 2,100, said Peter Cardillo, senior vice president and chief market analyst at S.W. Bach & Co.

Despite these concerns, Greenspan’s speech before the Omaha Chamber of Commerce appeared to provide enough reassurance on the economy to bring at least a few buyers back into the picture, paring the losses slightly.

Many investors are concerned about companies’ ability to continue growing at a solid pace in the months ahead.

Hewlett-Packard lost 73 cents to $23.13 after the company’s release of earnings Thursday prompted analysts to caution investors about its outlook. Hewlett’s earnings, which rose 30% for the quarter, met market expectations.

Other technology sector stocks also were lower. Cisco Systems was down 49 cents at $23.29, and Applied Materials slipped 38 cents to $21.75.

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Market Roundup, C6-7