Wall Street trade mixed after report of inflation rising

NEW YORK -- The stock market zigzagged in a tight range Tuesday after wholesale inflation rose more than expected in November, led by a surge in energy costs.

The increase likely will be discussed as Federal Reserve policymakers begin a two-day meeting on interest rates. The Fed is expected to keep rates unchanged when it releases a policy statement following the meeting Wednesday.

The Labor Department said wholesale prices jumped 1.8 percent last month, more than double the gain analysts expected. Core inflation, which excludes often-volatile food and energy costs, rose 0.5 percent, the biggest increase in more than a year.

A number of investors see a rate increase coming within the next year as the Fed makes a pre-emptive strike to keep inflation at bay. That would help shore up the value of the dollar, but also could trip up a rally that has pushed stocks sharply higher over the past nine months.

Investors also turned cautious after Best Buy said its fourth-quarter profit margins will face pressure as shoppers look for less expensive items. The comments came as the electronics retailer said its third-quarter earnings more than quadrupled.

The market has slowed its nine-month advance in December as traders look to lock in gains for the year and seek clues about what might be able to drive the market in 2010. The benchmark Standard & Poor's 500 index has jumped 64.7 percent from a 12-year low in March on relief that the economy was stabilizing. Analysts say investors will need substantive signs that the economy is improving to extend the gains next year.

Stephen Lieber, chief investment officer at Alpine Woods Investments, said investors are pouncing on any data to determine whether the economy is mounting a sustained recovery. He said the uncertainty is keeping some traders out of the market.

"The market is in a waiting game," he said.

In early afternoon trading, the Dow Jones industrial average fell 34.91, or 0.3 percent, to 10,466.14. The S&P 500 index fell 3.76, or 0.3 percent, to 1,110.35, and the Nasdaq composite index rose 0.01, or less than 0.1 percent, to 2,212.11.

Major stock indexes closed at new highs for the year Monday as concerns eased about global debt problems.

Meanwhile, the National Association of Home Builders said its housing market index fell in December on concerns that that a national unemployment rate of 10 percent will curb demand for new homes. The trade group said its index slipped one point to 16, the lowest level since June.

Bond prices fell, pushing yields higher. The yield on the benchmark 10-year Treasury note rose to 3.60 percent from 3.56 percent late Monday.

The dollar rose against other major currencies, while gold prices fell.

Crude oil rose $1.01, to $70.52 per barrel on the New York Mercantile Exchange.

Best Buy fell $3.80, or 8.4 percent, to $41.57.

Falling stocks narrowly outpaced those that rose on the New York Stock Exchange, where volume came to 515.9 million shares, compared with 492.9 million shares traded at the same point Monday.

Overseas, Britain's FTSE 100 fell 0.6 percent, Germany's DAX index rose 0.2 percent, and France's CAC-40 added 0.1 percent. Japan's Nikkei stock average fell 0.2 percent.