NEW YORK - Stocks finished a bruising week on the downside yesterday after a jump in consumer inflation raised concerns about how much freedom the Federal Reserve has to continue cutting interest rates. The Dow Jones industrial average gave up more than 178 points.
Concerns emerged after the Labor Department reported that its Consumer Price Index had a bigger-than-expected jump for November, with large increases in the cost of clothing, airline tickets and prescription drugs. That raised questions about the Fed's options for priming the economy.
Policymakers lowered interest rates this week and announced a plan to align with other key central banks and offer loans to pressed lenders around the world. But while it wants to stimulate the U.S. economy and make lending easier among banks wary of faltering debt, the Fed also has to keep an eye on inflation.
Robert Dye, senior economist at PNC Financial Services Group, said the economic readings this week painted a mixed picture for investors, spurring some of the market's volatility.
"If you take the stronger-than-expected economic data we saw this week in the form of retail sales, and add to that the inflation data, and then combine that with a somewhat ambiguous statement from the Fed, you get a picture as clear as mud," he said.
The uncertainty weighed on the markets yesterday, a day after stocks finished mixed. The Dow Jones industrial average fell 178.11, or 1.32 percent, to 13,339.85. The Standard & Poor's 500 index dropped 20.46, or 1.37 percent, to 1,467.95, and the Nasdaq composite index fell 32.75, or 1.23 percent, to 2,635.74.
It resulted in Wall Street's worst weekly showing in a month. For the week, the Dow tumbled 2.10 percent, the S&P 500 declined 2.44 percent, and the Nasdaq shed 2.60 percent.
Light, sweet crude oil dropped 98 cents to $91.27 a barrel yesterday on the New York Mercantile Exchange.
The new report on inflation at the consumer level follows a reading Thursday that showed the biggest jump in inflation at the wholesale level in 34 years.
Beyond economic reports, investors faced more news from the troubled banking sector.
Citigroup Inc. fell 31 cents to $30.70 after the bank announced late Thursday that it planned to move $49 billion of assets from seven "structured investment vehicles" onto its books to help the SIVs repay their debts.
SIVs are complex investments set up by banks and sold to investors, and they have come under pressure in recent months because of their investment strategy, which involves the use of mortgage investments and other now-risky debt. The resulting drop in demand hurt the value of the SIVs.
The Russell 2000 index of smaller companies fell 15.53, or 2.02 percent, to 753.93.