Inflation Jitters at Fever Pitch

Updated from 7:06 a.m. EDT

Easily distracted from strong corporate profits, investors are increasingly wearing their agita on their sleeves, anxious for the longest "eighth inning" in market history to end. Investors nervous over economic data and the Federal Reserve's plans face several key signposts this week, beginning with Tuesday's higher-than-expected producer price index report.

PPI rose 0.5% in March, reversing a 1.4% decline in February and higher than economists' consensus estimate for a rise of 0.4%. Stripping out food and energy prices, the so-called core PPI was up just 0.1% vs. expectations for a 0.2% gain.

Meanwhile, the Commerce Department said housing starts came in at an annual pace of 1.96 million units, down 7.8% from February. Building permits also fell, to a rate of 2.059 million. On average, economists had been forecasting starts at 2.025 million and permits at 2.10 million.

Major averages opened with modest gains Tuesday but Monday's market action shows how sensitive traders are to any signs the Fed is more or less likely to tighten beyond a presumptive rate hike on May 10. Stocks rose modestly early on, in part because of the salutary effects of a "dovish" article in The Wall Street Journal Friday, when U.S. financial markets were closed in holiday observance.

But major averages stumbled in the afternoon in reaction to comments from Chicago Fed President Michael Moskow. Speaking before a community group in Des Moines, Iowa, Moskow said "Inflation is near the upper end of the stable range" and warned that the Fed must be "vigilant'' in staving off inflationary pressures.

Moskow's comments compounded the inflationary implications of gold and oil hitting high-water marks again. Oil hit $70 per barrel as concerns mounted over political tension with Iran. Gold hit a new 25-year high Monday, surging $18.70, or 3.1%, to $618.80 an ounce, off an intraday high of $619.30.

After trading as high as 11,159.99 prior to Moskow's comments, the Dow Jones Industrial Average reversed course and closed down 63.87, or 0.57%, to 11,073.78. The S&P 500 fell 0.29%, or 3.79, to 1,285.33, and the Nasdaq Composite lost 14.95, or 0.64%, to 2.311.16.

Data Torture and the Fed

An increasingly "data-dependent" market now turns its attention to the minutes of the Federal Open Market Committee's March meeting, due later Tuesday, and Wednesday's March consumer price index report, which is forecast to gain 0.4% overall and 0.2% excluding food and energy .