NEW YORK - The stock market fell for the first time in five days and Treasurys slipped after a jump in inflation stoked concerns that the Federal Reserve would be forced to raise interest rates.
Stocks extended their losses late in the day yesterday after General Electric Co. forecast that revenue and earnings would largely be flat in 2010.
Trading was subdued as Fed policymakers gathered for a two-day meeting on interest rates. The Fed isn't expected to raise rates from their record low level, but the day's economic reports brought reminders that the central bank could be forced to raise rates sooner than expected to keep inflation at bay.
The government said wholesale prices jumped 1.8 percent last month, more than double the gain analysts had expected. Core inflation, which excludes often-volatile food and energy costs, rose 0.5 percent, the biggest increase in more than a year.
Analysts said the increase in food and energy costs was likely a concern for Fed officials.
"They're the twin pistons of inflation," said Christopher Wolf, managing partner and co-chief investment officer at Cogo Wolf Asset Management L.L.C. in San Francisco.
Meanwhile, the Fed said industrial production rose 0.8 percent in November, the biggest gain since August. The rise in production meant factories ran at a higher capacity. The portion of capacity being used remains below average, but if factories start seeing demand increase, prices could rise.
If prices start rising and the Fed raises rates, it could choke off a nascent economic recovery. The Fed is expected to release a statement on the economy and interest rates this afternoon after its meeting.
The Dow Jones industrial average fell 49.05, or 0.5 percent, to 10,452.00. The S&P 500 index fell 6.18, or 0.6 percent, to 1,107.93, and the Nasdaq composite index fell 11.05, or 0.5 percent, to 2,201.05.
The Dow and S&P 500 index closed Monday at their highest levels since October 2008 as concerns eased about global debt problems.
The Russell 2000 index of smaller-company stocks fell 3.48, or 0.6 percent, to 606.31.
The dollar rose to its highest level in two months against the euro, while gold prices fell.
Investors turned cautious after GE's forecast. CEO Jeffrey Immelt said that the conglomerate is rebounding after a difficult year and that it is looking to rely more on its energy and health-care businesses and less on its financial arm for earnings in 2010. The stock fell 20 cents, or 1.3 percent, to $15.75.
Meanwhile, Best Buy Co. said its fourth-quarter profit margins would face pressure as shoppers look for less expensive items. The comments came as the electronics retailer said its third-quarter earnings more than quadrupled. Best Buy fell $3.84, or 8.5 percent, to $41.53.