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An in-line increase in the most prominent measure of inflation in the U.S. economy is leaving stocks in a flattish mood.


Labor Department

said that the headline

Consumer Price Index gained 0.2% overall, shy of the 0.3% increase predicted of economists polled by


. The core rate, which excludes food and energy prices, gained 0.2%, matching expectations.

Stock futures firmed a bit on the news. At 9:15 a.m. EST, the

S&P 500

futures were up 4.1 points. That's actually a negative indication, since the futures closed about 7 points below fair value.

The bond market also edged higher. The 10-year note was up 7 ticks to 99 25/32, yielding 6.530%. The 30-year Treasury, meanwhile, was up 29/32 to 101 9/32, putting the yield at 6.155%.

"They really whacked the


futures after the cash close yesterday," said Bill Meehan, chief market analyst at

Cantor Fitzgerald

. "And the attempt at a rally this morning was a dismal failure."

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Nasdaq 100

futures were lately up 5.5 to 4112, about 10 points below the cash Nasdaq 100, and about 30 points below fair value. That should set some program selling in motion for the early going.

The market needed a cool CPI. Yesterday,



Alan Greenspan

went before the

House Banking Committee

and warned that stock-market returns would have to slow dramatically if the "macroeconomic imbalances" that threaten to spark inflation were to correct themselves. But emboldened by a benign

Producer Price Index, the market reacted predictably: The companies with the highest growth rates flew unfettered to new heights, and the rest of the market fell back and struggled.

The sense on Wall Street is that until core inflation ticks up significantly, the Fed will not tighten any more aggressively than in the characteristic 25-basis-point increments the market has been getting since last June. And if recent history is any guide, that sort of mild vigilance will not derail the high-growth sectors

Still, the fairly explicit case that Greenspan laid out yesterday for a

speed limit on stock market returns has some worried.

"The positive spin was that there was no indication that the Fed's tactics are going to change," Meehan said. "But had that speech been delivered two years ago, the market would have absolutely tanked."

"If we bid up some of these big cap techs more, I'll just gradually, in small, Fed-like steps, buy more puts."

The large European bourses were mixed in afternoon trading Frankfurt's

Xetra Dax

was up 39.42 to 7619.95, while the Paris


was 25.77 lower to 6129.19. London's


was up 29.3 to 6238.6.

The euro was lately trading down at $0.9822.

Asian markets were flat to lower overnight.

In Tokyo, the


fell 2.37 to 19,789.03. Concern that

Moody's Investors Service


downgrade Japan's government debt rating from the current Aa1 kept the yen under pressure. The dollar inched higher to around 110.8 yen in Tokyo trading, and was lately trading at 111.19 yen.

Greenspan's hawkish comments yesterday weighed on stocks in Hong Kong, whose interest rates track those in the U.S. The

Hang Seng

fell 382.07, or 2.3%, to 16,599.16.

After climbing as much as 2.3%, Korea's


reversed sharply late in the session to close down 18.38, or 2.1%, to 879.14.

For a look at stocks in the preopen news, see Stocks to Watch , published separately.