Inflation, spending push investors to sell

NEW YORK - Nervous investors collected profits and sent stocks lower Tuesday, wiping out an early advance amid conflicting signals about inflation and consumer spending.

The market pulled back when the Dow Jones industrials reached an eight-month high shortly after midday. Investors have been uneasy for months about inflation and soaring oil prices, and their anxiety was fed by a Labor Department report that said energy costs led a jump in wholesale prices last month. Many decided the safest strategy was to sell.

A better-than-expected monthly retail sales report that might have supported the market was undercut by a weak sales outlook from Target Corp., which also clouded strong results at The Home Depot Inc.

Wall Street's retreat also came despite crude oil settling below $57 a barrel for the first time since June 30. A barrel of light crude dropped 71 cents to $56.98 on the New York Mercantile Exchange.

At the close of trading, the Dow lost 10.73, or 0.1 percent, to 10,686.44. During the session, the Dow rose nearly 45 points to reach its highest level since March 15.

Broader stock indicators also gave up their gains. The Standard & Poor's 500 index finished down 4.75, or 0.39 percent, at 1,229.01, and the Nasdaq composite index declined 14.21, or 0.65 percent, to 2,186.74.

Bonds rose, with the yield on the 10-year Treasury note tumbling to 4.56 percent from 4.61 percent late Monday. The dollar was mostly lower against other major currencies, and gold prices were little changed.

Investors had little reaction to comments by Federal Reserve chairman nominee Ben Bernanke, who told a Senate committee that his top priority will be keeping Chairman Alan Greenspan's policy of fighting inflation.

The specter of higher prices unnerved Wall Street. The Labor Department's producer price index - a measure of wholesale prices often seen as a barometer of future inflation - grew 0.7 percent in October as energy prices drove up manufacturers' costs. Economists were expecting the index to be unchanged.

But the core index - setting aside volatile food and energy prices - fell 0.3 percent, compared with expectations for a 0.2 percent gain and September's 0.3 percent growth, the department added.

Meanwhile, the Commerce Department said retail sales rose 0.9 percent in October, excluding the effect of a recent slide in auto demand.