CPI has market confused

May 22, 2015 09:58 AM

Wall Street was mixed in early trading on Friday as investors digested data that showed rising inflation pressure, casting fresh doubt on when the Federal Reserve would ultimately raise interest rates this year.

U.S. consumer prices moderated in April, data showed, but the so-called core consumer price index, which strips out food and energy costs, posted its largest gain since January 2013.

The data comes a few hours ahead of Fed Chair Janet Yellen's take on the economy that investors will peruse for clues on the timing of a rate hike.

Yellen's speech at 1:00 p.m. ET (1700 GMT) is expected to acknowledge the recent economic sluggishness, including near stagnant performance in the first few months of the year.

While the Fed, which has a 2% inflation target, is broadly expected to raise interest rates this year, the timing of the hike has kept the market on tenterhooks.

"September is still the most likely (rate) lift-off date, but July is not out of the question, particularly not if we get another couple of robust rises in core consumer prices in May and June," said Paul Ashworth, chief economist at Capital Economics in Toronto.

Recent economic data has prompted investors to bet that interest rates will stay near zero till at least the latter part of the year, which has pushed the major stock indexes to record territory over the past couple of weeks.

Both the Dow and the S&P hit new records this week, but have traded in a narrow range and volumes have been subdued as the quarterly earnings season draws to a close.

At 10:01 a.m. ET (1401 GMT) the Dow Jones industrial average was down 23.19 points, or 0.13%, at 18,262.55, the S&P 500  was down 1.13 points, or 0.05%, at 2,129.69 and the Nasdaq Composite  was up 7.91 points, or 0.16%, at 5,098.70.

Eight of the 10 major S&P 500 sectors were lower, led a 0.64% drop in the utilities index 

HP shares rose 5% to $35.52 after it forecast split-related costs below the expectations of several analysts and its quarterly profit beat estimates.

Aeropostale slumped 15.8% to $2.18 after the teen apparel retailer estimated a bigger-than-expected quarterly loss.

ELong soared 31% to a four-year high of $27.05 after Expedia said it sold its entire stake in the Chinese online travel company to Ctrip.com  and others. Ctrip was up 9.6% at $78.90 and Expedia 6% at a new record of $112.31.

Campell Soup was up 2.17% at $47.95 and Deere & Co rose 2.8% to $92.01 after the companies posted better-than-expected quarterly profits.

Declining issues outnumbered advancers on the NYSE by 1,516 to 1,200, for a 1.26-to-1 ratio on the downside. On the Nasdaq, 1,247 issues rose and 1,071 fell for a 1.16-to-1 ratio favoring advancers.

The S&P 500 showed 13 new 52-week highs and no new lows, while the Nasdaq recorded 38 new highs and 14 new lows.

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Tanya Agrawal, Reuters