Stocks Down on Inflation Data, Insurance Investigation

Stock markets drifted lower today after a government report showed the first signs of inflation in some time were visible in the U.S. economy last month.

The Dow fell 58.70 points, or 0.59 percent, to 9,897.62, the Nasdaq lost 13.62, or 0.70 percent, to finish at 1,922.90. The S&P 500 fell 10.79, or just under 1 percent, to 1,103.23.

The Labor Department said the Consumer Price Index rose 0.2 percent in September after rising 0.1 percent in August. The so-called core rate, which strips out food and fuel costs, was up 0.3 percent, the largest monthly jump since April.

Fed Rate Hike

Analysts speculated that the report, which came after a wholesale prices reading that showed small price jumps as well, will probably help pave the way for another interest rate hike from the Federal Reserve before the end of the calendar year.

On Wall Street, the inflation news was part of a range of data being digested by investors, who were also dealing with another round of earnings, another drop in oil prices, and rumors that an investigation into illegal practices in the insurance industry had widened to include more companies and sectors.

On the positive side, oil futures continued to retreat from record high levels. Crude futures fell another 32 cents in trading today and have fallen 4 percent in the last two days after topping out at just under $55 on Friday. Analysts attributed the drop to profit-taking and concern that high prices will stem demand in price-sensitive parts of the world.

Reason for Optimism

Earnings reports also provided some reason for optimism. IBM was up 4 percent on the session after posting earnings that met expectations and holding firm on guidance for 2005. Texas Instruments also posted a solid quarter, beating analysts’ projections on both the revenue and profit side.

However, those factors were outweighed by concerns that the insurance industry could be crippled by a rapidly widening investigation into pricing practices. Worries that New York State Attorney General Eliot Spitzer would target health insurers as part of his investigation hit that sector hard and weighed on both the Dow and the S&P.

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