Stock prices drifted lower Wednesday as investors digested several conflicting reports on the U.S. economy.
The Dow Jones industrial average snapped a three-session winning streak with a drop of 5.44 points to 12,577.15. The Nasdaq composite index fell 18.36 points to 2,479.42.
The Federal Reserve issued it beige book report suggesting the nation's economy "expanded at a moderate pace" at the end of 2006. Fed chairman Ben Bernanke will address of Congressional committee Thursday to discuss the economy, interest rates and other trends.
Bargain hunters pushed oil prices higher Thursday. Crude traded as low as $50.60 a barrel before reversing to finish at $52.24, up $1.03. Traders will be watching for the release of oil and gasoline inventory data for the past week.
The Labor Department said before the market opened that the PPI, an indicator of inflation, rose by 0.9 percent in December -- slower than in November, but faster than the market expected.
"Inflation may be a worry, and that is job one at the Fed: to control inflation," said Kim Caughey, equity research analyst at Fort Pitt Capital Group in Pittsburgh. Wednesday's PPI figure "makes it more unlikely that easing will happen, and may make it likely for the Fed to raise rates."
Also weighing on stocks was a rebound in oil prices and an outlook fromIntel Corp. (Nasdaq: INTC), the world's largest chip maker, that suggested profits in the technology sector might weaken this year.
Although the indexes were lower, advancing issues narrowly outnumbered decliners on the New York Stock Exchange, where volume came to 2.72 billion shares, up from 2.65 billion at the same point Tuesday.
Bond prices edged lower on the PPI data and the Fed survey, though most Treasury market participants don't anticipate any moves by the Fed until much later in the year. The yield on the benchmark 10-year Treasury note rose to 4.77 percent from 4.75 percent late Tuesday.
The dollar slipped against other major currencies, while gold prices rose.
Before Wednesday's PPI report, inflation concerns were calmed by a huge tumble in crude oil prices, which should lead to lower fuel bills for consumers. The markets are now bracing for the consumer price index, scheduled to be released Thursday.
Oil prices are down more than 14 percent this year.
"Especially for the lower-end consumer, having this drop in energy prices should help to put a little bit more money back in their pockets so they can keep spending," Sampson said.
Concerns about whether the Fed will raise rates, lower them, or keep them on hold this year has been in the forefront of investors' minds, offsetting the effects of some corporate earnings reports. Still, the financial results to be released in the coming weeks will be watched closely for signs of strength or weakness in the economy.
"We all know the economy is slowing, we just don't know how much. Earnings season is a great time to find out how much," Caughey said.
Strong earnings reports from financial services companies Charles Schwab Corp. (Nasdaq: SCHW), JPMorgan Chase & Co. (NYSE: JPM) and Mellon Financial Corp. (NYSE: MEL) gave a positive economic picture Wednesday.
Those companies' stocks failed to rally on the news, though, as some investors expected even more robust earnings and worried about signs of worsening credit quality. Charles Schwab fell 49 cents to $19.69, JPMorgan rose 4 cents to $48.43, and Mellon fell 51 cents to $42.91.
Struggling home builders got a boost Wednesday after Lennar Corp.'s (NYSE: LEN) chief executive said the company would fare the same or better in 2007 than it did in 2006. The comments bolstered investors' hopes that the housing market has nowhere to go but up.
Lennar rose $2.23, or 4.5 percent, to $51.95.
The technology sector pulled back after Intel said late Tuesday that fourth-quarter profit plunged and that 2007 profit margins would be weaker than analysts had expected. Intel dropped $1.26, or 5.7 percent, to $21.04.
Investors in Apple Inc. (Nasdaq: AAPL), however, were cheered after the market closed and the company reported record fourth-quarter profit that beat analysts' expectations. Apple shares rose 4 percent in electronic trading, after closing down $2.15, or 2.2 percent, at $94.95.
The Russell 2000 index of smaller companies fell 2.71, or 0.34 percent, to 788.77.
Overseas, Japan's Nikkei stock average rose 0.34 percent. Britain's FTSE 100 was down 0.18 percent, Germany's DAX index was down 0.23 percent, and France's CAC-40 was down 0.53 percent.
The Associated Press contributed to this report.
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