Dow Down 25; Nasdaq Drops 3

Stock prices slid in early trading Friday, reversing an upward blip at the opening of trading, after a drop in a widely-watched consumer sentiment index.

The University of Michigan consumer sentiment index was reported to be 87.2 in mid-June, a sharp drop from May’s reading of 92.1.

Stocks had risen in the early minutes of trading in response to a Labor Department report showing a drop in wholesale prices, which raised hopes for an interest rate cut later this month.

The Dow Jones industrial average was off 25.00, or 0.27 percent, at 9,201.45 in early trading.

Broader market indicators were also lower. The Nasdaq composite index fell 3.22, or 0.19 percent, to 1,650.40. The Standard & Poor’s 500 index fell 2.86, or 0.29 percent, to 995.65.

Before trading opened, the Labor Department reported that wholesale prices fell 0.3 percent in May, following a record drop of 1.9 percent the month before. The reports have deepened worries that the economy could be hit by deflation, a damaging trend where prices for goods and services decline overall.

On the positive side, many traders believe that the Federal Reserve may take steps to combat those price declines by making another cut in short-term interest rates at its June 24-25 meeting.

A rate cut would help boost the economy overall by encouraging lending and borrowing, which could in turn encourage investors to put money back in the stock market.

Oracle rose sharply Friday morning after the maker of business software reported stronger than expected earnings late Thursday. Oracle was up 59 cents at $13.92 after several analysts upgraded the company’s shares.

Oracle also said it plans to make a series of presentations to investors to explain its proposed acquisition of PeopleSoft. PeopleSoft’s board formally rejected Oracle’s 16-per-share offer on Thursday. PeopleSoft was off 14 cents at $17.23.

Honeywell rose 76 cents to $28.67 after the aerospace company reported $1.3 billion of new orders for jet parts and services.

The Russell 2000 index, which tracks smaller company stocks, fell 1.85 or 0.41 percent to 454.89.

Overseas, Japan’s Nikkei stock average finished up 0.7 percent. In afternoon trading in Europe, France’s CAC-40 gained 0.2 percent, Britain’s FTSE 100 gained 0.44 percent and Germany’s DAX index 0.68 percent.

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