Stocks Fall Slightly Amid OPEC, Inflation Worries

Stocks fell slightly Friday as investors worried about OPEC's decision to cut production and a jump in wholesale prices, but a bullish reading of consumer sentiment helped limit the losses.

The Dow Jones industrial average (search) was down 9.60 points, or 0.09 percent, to finish unofficially at 10,543.22, based on the latest data. The Standard & Poor's 500 Index (search) was down 1.24 points, or 0.10 percent, to close at 1,188.00. The technology-laced Nasdaq Composite Index (search) was down just 0.94 of a point, or 0.04 percent, to end at 2,128.07.

For the week, the blue-chip Dow average fell 0.46 percent, while the broad S&P 500 dipped 0.27 percent, and the Nasdaq Composite Index shed 0.93 percent.

Investors were rattled by the Labor Department's (search) latest Producer Price Index report, which measures wholesale prices. The PPI rose 0.5 percent in November, far less than October's 1.7 percent rise, but still a troublesome indicator of possible inflation.

The sour mood overshadowed a surprising drop in crude oil futures, which came after OPEC agreed to cut oil production by 1 million barrels per day. The move was designed to keep prices steady, although even with Friday's drop, they remain at historically high levels. A barrel of light crude was quoted at $40.71, down $1.82, on the New York Mercantile Exchange (search).

''A lot of the run-up in oil was speculation, and some of that froth has been taken out,'' said Chris Wiles, senior director of large cap growth and core equity investment for the Armada Funds. ''And the reaction to the OPEC moves shows that OPEC is just not the driving force that they used to be. That's good for our economy.''

The University of Michigan's (search) latest consumer sentiment index reading helped assuage some fears, as the index rose to 95.7 from 92.8 in November. Economists had expected a reading of 93.2, and the index's gains bode well for increased consumer spending this month.

''Overall, this headline PPI number came in a lot higher than expected, but then we got better sentiment than expected,'' said Scott Wren, equity strategist for A.G. Edwards & Sons. ''All told, this news is kind of a wash, but it gives us the chance to move a little higher later on.''

The wholesale prices report convinced many investors that the Federal Reserve (search) would move the nation's benchmark interest rate higher by a quarter percentage point at its meeting on Tuesday. Rates currently stand at 2 percent, but with a weak dollar, rising energy costs and climbing wholesale prices, a rate hike — and future moves higher — are considered very likely.

Johnson & Johnson (JNJ) lost $1.06 to $60.25 after The Wall Street Journal said the health care and consumer products company is near an agreement to acquire medical device maker Guidant Corp. (GDT ) for about $24 billion in cash and stock. Guidant fell $2.20 to $71.55 on the news.

Another threat to stocks is a higher dollar. The U.S. currency leapt over 1 percent against its major peers Friday. A sliding greenback can depress stocks because it dissuades foreign investors from buying US assets.

The rise in wholesale prices has not yet filtered down to consumers to any great degree, which has left many companies with tighter margins and the prospects of reduced growth, or even modest downsizing. Auto parts maker Delphi Corp. (DPH) said it plans to cut 8,500 jobs in 2005, with 5,500 of those cuts coming from overseas jobs. The company also reduced its fourth quarter earnings forecasts to reflect the cuts and lower sales. Delphi lost 14 cents to $8.50.

Nextel Communications Inc. (NXTL) slipped 5 cents to $29.76 as numerous media reports had the company in acquisition talks with Sprint Corp. (FON). However, Verizon Communications Inc.'s (VZ) wireless subsidiary was also considered a potential bidder for Nextel. Sprint shed 14 cents to $24.14, while Dow component Verizon fell 40 cents to $40.80.

Southwest Airlines Co. (LUV) lost a penny to $15.71 after it said it may make a $100 million bid in bankruptcy court for some of Airtran Holdings Inc.'s assets, including six of the carrier's 14 gates at Chicago's Midway Airport. Southwest said it would also enter into a code-sharing agreement with ATA for its Chicago Midway routes. Airtran rose 2 cents to $11.01.

AT&T Corp. (T) said it expects its fourth quarter revenues to come in higher than the $4.8 billion previously expected. The company credited strong growth in consumer services for the increase in sales. AT&T edged 2 cents higher to $18.80.

St. Paul Travelers Cos. Inc. (STA) was up 24 cents at $36.85 despite receiving a subpoena from New York's attorney general inquiring about the company's lawyers' professional liability insurance underwriting.

The Russell 2000 index of smaller companies was up 3.05, or 0.48 percent, at 632.24.

Overseas, Japan's Nikkei stock average fell 0.18 percent. In Europe, Britain's FTSE 100 closed up 0.12 percent, France's CAC-40 gained 0.56 percent for the session, and Germany's DAX index rose 0.58 percent.

Reuters and the Associated Press contributed to this report.