Inflation Data Sink Stocks

The Federal Open Market Committee, the policymaking arm of the Fed, next meets for a two-day meeting on Jan. 29.

"The headline was boosted by energy prices, with gasoline up 9.3%," said Ian Shepherdson, chief economist with High Frequency Economics. "The year-over-year trend remains downwards and the month-over-month data are erratic, but this might be the start of a firming induced by the falling dollar."

U.S. Treasury securities were lower following the CPI report. The 10-year note lost 8/32 in price to yield 4.23%. The 30-year bond was off 7/32 in price, yielding 4.65%. The dollar rallied.

Just one day ago, the Labor Department said its producer price index jumped 3.2% last month, doubling expectations to become the largest increase in more than 34 years. The core PPI rose 0.4% and also was twice what was anticipated.

Also on the economic docket, the Fed said that industrial production rose 0.3% in November, above economists' projections. Capacity utilization rose to 81.5% from 81.4% but was below the consensus.

Following the prior close, Citigroup (C Quote) said it would assume control of seven structured investment vehicles, or SIVs, totaling $49 billion it will add to its books. The rescue puts a strain on Citi's already stressed balanced sheet.

The move also hints at the death of the $100 billion superfund that Citigroup, Bank of America (BAC Quote), and JPMorgan Chase (JPM Quote) hoped to create. After Citi's announcement, Moody's downgraded the firm's long-term debt rating. Shares of Citi were down 31 cents, or 1%, to $30.70.