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Wall Street fails to overcome dismay at rise in inflation

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 will indeed improve. The major indexes all ended the week with losses, and the NASDAQ composite index was down for the fifth straight week.

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, or 0.4 percent, 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, or 0.3 percent, to 1,144.11, while the NASDAQ composite index was off 8.03, or 0.4 percent, at 2,037.93.

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

The Consumer Price Index rose 0.5 percent, 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 percent.

The report prompted investor concern about whether the rising prices might make the Fed more inclined to raise interest rates, especially since 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.

"Here you have in the last two days a bunch of reminders that this is not a perfect world," said Joseph Battipaglia, chief investment officer at Ryan Beck & Co in New York. "When you put that all together, it doesn't surprise me that it [the market] couldn't hold the advance of yesterday."

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 SW Bach & Co.

"What we're seeing here is consolidation at the upper end of the trading range," he said.

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.

Friday's session reflected Wall Street's erratic pattern of late. After beginning the year with a robust rally, stocks have succumbed to uncertainty about earnings and the economy although the recovery continues at a fairly steady pace.

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

Hewlett-Packard Co lost US$0.73 to US$23.13 after the company's release of earnings Thursday prompted analysts to caution investors about its outlook. Hewlett's earnings, which rose 30 percent for the quarter, met market expectations.

Other technology sector stocks were also lower. Cisco Systems was down US$0.49 at US$23.19. Applied Materials slipped US$0.38 to US$21.75.

Other shares trading heavily included the Coca-Cola Co, which announced Thursday that its chairman and chief executive, Doug Daft, plans to retire at the end of the year. Coke was down US$0.06 at US$50.94.
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