Dow slips on credit, inflation worries

Source: Agencies  |   2008-6-5  |     ONLINE EDITION

US blue-chip stocks dipped yesterday to close at their lowest since mid-April after Federal Reserve Chairman Ben Bernanke stoked inflation worries and concerns about more credit losses dogged financial shares.

Technology shares snapped back after two down days, however, helped by some positive brokerage comments on chip makers and data showing unexpected resilience in private-sector employment and the services sector.

The market had spent much of the day up, but took a turn lower late in the session, after Bernanke said policy-makers were concerned by signs of rising long-term inflation expectations. His remarks renewed worry that the Fed's next step is to raise interest rates.

"Now the speculation is: 'Will the Fed raise rates?' So out of fear, people think we're back to the old word 'stagflation,'" said Victor Pugliese, director of listed equity trading at Broadpoint Securities in San Francisco.

Financials fell for the third day in a row on concerns about more credit losses, even as the chief focus of that worry for the past two days, Lehman Brothers, retraced some of the 18 percent it had fallen since last Thursday.

Moody's Investors Service said it is likely to cut the top credit ratings of the bond insurance arms of MBIA Inc and Ambac Financial Group on concerns about mortgage-related losses and limited new business prospects.

But the drop could have been deeper, had it not been for a pullback of US$2 a barrel in oil prices to US$122.30.

The Dow Jones industrial average fell 12.37 points, or 0.10 percent, to end at 12,390.48, while the Standard & Poor's 500 Index inched down 0.45 of a point, or 0.03 percent, to 1,377.20.

The Nasdaq Composite Index gained 22.66 points, or 0.91 percent, to close at 2,503.14.