U.S. Stocks Trim Gains Amid Concern Over Chinese Inflation

U.S. Stocks Trim Gains Amid Concern Over Chinese Inflation

 

By Michael P. Regan

March 10 (Bloomberg) -- U.S. stocks trimmed gains as theStandard & Poor’s 500 Index approached its high of the year fora second day and speculation grew that accelerating inflationwill force China to raise interest rates.

Chevron Corp., Cisco Systems Inc. and Caterpillar Inc. lostat least 1 percent to help drag the Dow Jones Industrial Averagelower before China releases data on prices tonight. Financialshares led the market higher earlier amid signs of improvementin the corporate bond market.

“There’s buzz going around that it’s going to be hotterthan expected,” Art Hogan, the chief market analyst at NewYork-based Jefferies & Co., said of the Chinese inflation data.

The S&P 500 rose less than 0.2 percent to 1,142.37 at 12:47p.m. in New York after rallying as much as 0.7 percent earlierto come within 2 points of its 2010 high. The Dow JonesIndustrial Average lost 17.76 points, or 0.2 percent, to10,546.62.

Newmont Mining Corp. paced declines in metal producers asgold, copper and aluminum dropped at least 1.3 percent inLondon. China’s exports jumped more than forecast in Februaryand property prices rose at the fastest pace in 23 months,adding to pressure on policy makers to pare back stimulusmeasures adopted during the global recession.

Tonight’s report on Chinese inflation is important in“light of the possibility of an interest rate hike at some pointin China,” Peter Boockvar, equity strategist at Miller Tabak &Co., said in a note to clients. “Due to China’s voraciousappetite for commodities as we all know, the relationship oflate is not likely a coincidence.”

Yearlong Rally

U.S. stocks rose yesterday on the anniversary of the 2009bear-market low for the S&P 500 amid speculation the economywill continue to recover from the worst contraction since theGreat Depression. The S&P 500 has rallied 69 percent from a 12-year low last March as the Federal Reserve kept its benchmarkinterest rate near zero to stimulate economic growth.

The main benchmark for U.S. stocks has recovered lossesafter sliding as much as 8.1 percent from this year’s high amidconcern that some European countries will fail to pay back debtand speculation the Federal Reserve will need to rein inemergency stimulus measures as the economy improves.

Greek Prime Minister George Papandreou said after a meetingat the White House yesterday that U.S. President Barack Obamaexpressed support for measures being taken to deal with thefinancial crisis. The worst of Greece’s financial crisis is overand other European nations won’t follow in its path, formerEuropean Commission President Romano Prodi said.

Still, the Bloomberg Professional Global Confidence Indexfell to 53.8 from 54.9 in February. Sentiment declined inEurope, suggesting policy makers may need to rein in fiscalstimulus efforts before evidence emerges of sustained recoveriesin some economies. The index exceeded 50 for an eighth month,which means there were more optimists than pessimists.