Economy Inflation and retail reports on investors' agenda

By Matthew Craft

AP Business Writer

NEW YORK (AP) -- For investors, inflation has been a phantom menace.

The Labor Department said Friday that consumer prices rose 0.5 percent last month, the largest increase since June 2009. But roughly 80 percent of that increase is a result of higher gas prices.

Subtract food and energy costs and consumer prices only increased by 0.1 percent for the second straight month. This so-called core inflation has gained 0.8 percent in the past year.

"There's reason to be worried about inflation," said Tom di Galoma, head of fixed-income trading at Guggenheim Partners in New York. "Prices of oil, corn and wheat are all way up. But at the end of the day, if the unemployment rate is at 9.4 percent, there's not enough demand to drive inflation higher. People just aren't spending that much."

Some worry that rising food and energy prices could still undermine the economic recovery. The government reported Thursday that higher food and oil costs lifted U.S. wholesale prices last month by the largest amount in nearly a year, pressing retailers to pass along the costs to consumers.

In a separate report out Friday morning, the Commerce Department said retail sales rose for a sixth straight month in December. The 0.6 percent increase was driven by gains in automobile and furniture sales.

Ahead of the opening bell, JPMorgan Chase said its profit soared 47 percent in its fourth quarter, beating analysts' expectations. The results were partly a result of the bank putting aside less money to cover losses on loans.

After the market closed Thursday, Intel Corp. reported that its income rose 48 percent last quarter, easily beating analyst estimates.

Before Friday's market opening, Dow Jones industrial average futures are down 37 points, or 0.3 percent, at 11,646. S&P 500 futures are down 4, or 0.3 percent, at 1,277. Nasdaq 100 futures are down 1, or 0.1 percent, at 2,301.

Stocks dipped slightly on Thursday after the Labor Department said that 35,000 more people made first-time claims for unemployment benefits last week. That's the highest level since October and above what economists had predicted.

Merck & Co.'s stock dropped after saying that it would stop clinical trials of its cardiovascular drug vorapaxar for some patients. Merck was the biggest loser among the 30 stocks that make up the Dow Jones industrial average.

Published: Mon, Jan 17, 2011