Consumer Price Index
rose higher than expected, fueling fears that inflation is on the prowl and ready to pounce.
The major indices tumbled on the news. The
Dow Jones Industrial Average was taking it a bit harder than the
Nasdaq Composite Index, which has suffered plenty this month.
The CPI rose 0.6% last month. This key inflation measure was expected to rise only 0.3%, compared with a 0.2% increase in December. It was driven higher by energy and tobacco prices. Excluding volatile food and energy prices, the CPI rose 0.3%, also higher than the anticipated 0.2%. It had risen only 0.1% in December.
When last week's
Producer Price Index came out
higher than expected, it was considered an aberration, a fluke. Many said next month it would come in showing recessionesque numbers again.
And while some could say that neither number is accurate and that next month will show that the economy is still slowing, having two pieces of economic news showing inflationary numbers coming out within a week doesn't bode well.
The problem is, when inflation is rising in an economic slowdown the
Fed can do little about it. It's that old '70s fun called stagflation. Fed Chair
Alan G. and his cronies can't cut rates in the face of inflation, so they have to sit back and let the recession run its course.
Peter Eavis wrote more about the
phenomenon in an earlier story.
Meanwhile, many of the tech-heavy Comp's components were trying to recover some of what they lost in yesterday's action, when a who's who of tech issues hit 52-week lows, including networking giant
. It lately was up 1.4% to $26.50.
Another name that hit its 52-week low in Tuesday's session was
. The stock didn't stop there, though; it was continuing its descent in recent action, thanks to a
downgrade and an earnings view trim from
. Sun lately was the most actively traded stock on the Nasdaq, off 9.3% to $20.25.
The Dow was getting pulled down by a couple stocks in very diverse industries. Soft drink giant
was falling after getting socked with a downgrades from
. The company also announced that it was partnering with fellow blue-chip
Procter & Gamble
to form a stand-alone business to sell their juices, juiced-based drinks and snacks. The company is expected to have annual sales of up to $5 billion in two years. Coke was down 6% to $54.95, while Procter & Gamble was 1.6% higher to $76.90.
Also, The Home Depot
which got a nice lift on news yesterday that it met estimates was getting slapped down today. The home improvement retailer announced that its co-founder and co-chairman, Arthur Blank, was retiring. The stock was down 4.5% to $42.18.
Semiconductors were the spotlight sector today, with the
Philadelphia Stock Exchange Semiconductor Index
jumping 6.2%. The chipmakers were being snapped up by bargain hunters -- just look at
which were all having nice bounces. Rambus was up 8.2% to $44.09, Applied Materials was 7.9% higher to $49.50 and KLA was rising 9% to $44.
was initiated with a hold rating at
Credit Suisse First Boston
. It was edging up 4.9% to $40.50.
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Treasury prices were lower following the higher-than-expected CPI. The benchmark 10-year
Treasury note was down 11/32 to 98 28/32, yielding 5.145%.
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