NEW YORK (Dow Jones)--U.S. stocks fell slightly Tuesday while commodities rallied as investors, still mulling over the potential impacts of the Federal Reserve's stimulus plans, have became increasingly fearful of inflation.
The Dow Jones Industrial Average fell 32 points, or 0.3%, to 11375. Chevron weighed on the Dow with a 1% drop after the energy giant agreed to pay $3.2 billion in cash and assume $1.1 billion in debt to purchase Atlas Energy. Atlas shareholders will receive $38.25 a share in cash, a premium of 21% over its Monday closing price. Shares of Atlas, which isn't a Dow component, surged 34%.
Limiting the drop was Exxon Mobil, which climbed 1.6% as crude-oil futures climbed above $87 a barrel while natural-gas futures also rose. Aluminum giant Alcoa was also strong, up 1.4% as metals futures climbed.
The Nasdaq Composite fell 0.2% to 2576. The Standard & Poor's 500-stock index shed 0.3% to 1220, with financial and consumer companies leading the drop while the energy and materials sectors rose because of the gains in commodities as well as the Chevron deal.
Gold futures were particularly strong, reaching fresh records above $1400 an ounce and boosting metals companies. Freeport-McMoRan Copper & Gold climbed 2.3%.
The rise in commodities came as investors continued to digest the Federal Reserve's plans, announced last week, to inject the economy with $600 billion in stimulus. The news drove stocks to highs not seen in two years, although many fear it could lead to inflation.
"With the incredibly easy money policy that's going on, if you're an investor and you want to preserve your purchasing power, you need a hedge," said Paul Simon, chief investment officer at the Tactical Allocation Group. "What better place than the hard assets?"
However, investors worried about how gains in commodities like oil and natural gas might ultimately impact the consumer.
The rising commodities prices are "certainly a cost to U.S. households," said Bill Stone, chief investment strategist at PNC Wealth Management.
Stone said Tuesday's small drop also seems to be a natural pullback from a strong rally in the market over the past few months.
With the S&P 500 up 17% since the end of August, "a little breather is probably in order anyway and just treading water is not necessarily a bad thing in that respect," Stone said.
Among U.S. economic data, inventories at U.S. wholesalers grew more than twice as much as expected in September, a sign investors took as confidence on the part of companies that demand will hold up as the economy keeps recovering.
However, Simon said, "I would be very cautious about inventory build at this particular time when the end consumer's going to be under inflationary pressures in food and energy."
Investors drew some encouragement from data showing small-business activity in the U.S. picked up in October and job creation turned positive, according to the National Federation of Independent Business.
Still, the NFIB report also called the Fed's stimulus plan "a highly doubtful policy course," adding to a chorus of criticisms regarding it. Global controversy has been mounting over the Fed's moves, with President Barack Obama defending the move while China, Russia and the euro zone have come out against it. The debate is heating up ahead of a Group of 20 summit meeting that begins Wednesday night in Seoul.
The euro edged up to $1.3875 after a Greek Treasury-bill auction went reasonably well, helping ease worries over the financial health of debtor nations on the periphery of the euro zone.
The U.S. Dollar Index, tracking the U.S. currency against a basket of six others, edged up 0.2%. Treasurys fell, pushing the yield on the 10-year note up to 2.60%.
Among stocks in focus, Ambac Financial Group plunged 54% to 24 cents. The company filed for Chapter 11 bankruptcy protection after the Internal Revenue Service questioned the accounting that allowed the bond insurer to receive more than $700 million in tax refunds.
(source:wsj.com)
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