Stocks Fluctuate on PPI Data

By CHRISTOPHER WANG

NEW YORK – Stocks fluctuated in skittish trading Tuesday as declines in oil and gold prices met with jitters over troubling data on wholesale inflation.

The major indexes zigzagged wildly as investors struggled to make sense of the Labor Department’s producer price index, which is seen as a precursor to consumer-level inflation. While the overall PPI for May grew 0.2 percent, core prices – without food or energy – rose 0.3 percent to top economists’ estimates of 0.2 percent.

But Ken McCarthy, chief economist for vFinance Investments, said the gain in core PPI was not a major concern since annual core inflation still stood at a mild 1.5 percent rate. He added that the PPI was less significant because it included only finished goods, while Wednesday’s consumer price index would also account for services.

“It’s encouraging that we’re not seeing (the impact of energy costs) in core finished goods,” McCarthy said. “But this is just the appetizer before tomorrow’s main event.”

Meanwhile, a downturn in commodities fed hopes about easing inflation. Oil prices dropped below $69 a barrel, and gold slid beneath $600 an ounce following several months of speculation that drove prices to 26-year highs.

In midday trading, the Dow Jones industrial average rose 15.84, or 0.15 percent, to 10,808.42. The day before, the Dow plunged nearly 100 points to see its worst finish since early February; the blue-chip index is about 90 points from turning negative for 2006.

Broader stock indicators vacillated. The Standard & Poor’s 500 index was down 0.05 at 1,236.35, and the Nasdaq added 5.11, or 0.24 percent, to 2,096.43.

Despite the major indexes’ advance, declining issues topped advancers by almost 3 to 2 on the New York Stock Exchange, where volume of 942.2 million shares led the 627.3 million shares changing hands at the same point Monday.

Bonds drifted, with the yield on the 10-year Treasury note slipping to 4.97 percent from 4.98 percent late Monday. However, the 2-year yield stood at 5.01 percent; the inversion of yields showed increased expectations for slowing economic growth.

The U.S. dollar gained on the Japanese yen and was flat against European currencies; gold prices plunged to about $580 per ounce and carried metal prices lower, which bode well for the inflation outlook.

Crude futures fell further as Tropical Storm Alberto posed little threat to refineries in the Gulf of Mexico. A barrel of light crude dropped $1.66 to $68.70 on the New York Mercantile Exchange.

Investors received more signs of a moderating economy when the Commerce Department said retail sales grew just 0.1 percent in May after surging 0.8 percent the month before. Excluding dwindling automobile demand, retail sales gained 0.5 percent.

But the PPI data reinforced Wall Street’s fear of higher interest rates in a slowing economy, extending stocks’ monthly decline. On Monday, a late-day selloff pulled the Dow Jones industrials down nearly 100 points and left the Nasdaq composite index at a seven-month low – off 10.9 percent from its recent high on May 8.

While Wall Street had mild reaction to the day’s data, overseas stock markets roiled in concerns about rising interest rates hindering U.S. consumer demand for foreign-made products. Japan’s Nikkei stock average plunged 4.14 percent to a two-year low, and stocks in India slid 4.4 percent to a 52-week low.

Elsewhere overseas, Britain’s FTSE 100 lost 1.8 percent, Germany’s DAX index sank 1.92 percent and France’s CAC-40 was lower by 2.24 percent.

In earnings news, Goldman Sachs Group Inc. posted sharply better-than-forecast results for the second quarter, helped by strong investment banking and trading business. Goldman Sachs nonetheless skidded $5.04 to $139.96.

Best Buy Co. said its profit swelled 38 percent to beat estimates as customers bought more big-ticket items and cost-cutting measures boosted its margins. Best Buy jumped $1.32 to $50.35.

The Russell 2000 index of smaller companies rose 1.68, or 0.25 percent, to 684.87.

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