(Bloomberg) — U.S. stocks fluctuated as data showed the fastest rise in consumer prices in two years and Federal Reserve Chair Janet Yellen said she expects to raise interest rates this year, though the pace of further increases will be gradual.
Boeing Co. fell 1.6 percent, while airline shares dropped. Energy companies retreated with the price of oil. Hewlett- Packard Co. added 3.3 percent after its results exceeded forecasts. Intuit Inc. climbed 2.9 percent as quarterly sales beat estimates. Deere & Co. rose 4.1 percent after raising its 2015 profit forecast.
The S&P 500 Index slipped less than 0.1 percent to 2,130.10 at 2:37 p.m. in New York, after closing Thursday at a record. The Dow Jones Industrial Average lost 20.66 points, or 0.1 percent, or 18,265.08. The Nasdaq Composite Index rose 0.1 percent, topping its all-time high. Trading in S&P 500 companies was 24 percent below the 30-day average for this time of day. Markets are closed Monday for the Memorial Day holiday.
"The comment that a hike would be gradual might've eased some fears that maybe rates were going to increase quickly once they began," said Joe Bell, a Cincinnati-based senior equity analyst at Schaeffer's Investment Research Inc. "We've pushed up against some resistance and we're consolidating here. Even with positive news, the reaction was always going to be moderate."
Yellen expects to raise interest rates this year if the economy meets her forecasts, with a gradual pace of tightening to follow. While the labor market is nearing full strength, "we are not there yet," she said Friday in a speech in Providence, Rhode Island.
Consumer Prices
Delaying first rate increase until employment and inflation return to the Fed's objectives "would risk overheating the economy," Yellen said.
A report Friday showed the cost of living excluding food and fuel rose at a faster pace than expected in April, indicating inflation is inching toward the Fed's goal. The core consumer-price index climbed 0.3 percent, the biggest gain since January 2013. Recent mixed economic reports had prompted investors to push back estimates for when the Fed will begin raising rates, helping to drive equities to all-time highs.
Reports Thursday showed sales of existing homes in April unexpectedly dropped, after the March pace was the strongest in almost two years. A series of factory reports yesterday indicated the industry remains tepid this month against a backdrop of weaker global growth and a strong dollar.
Most Fed officials have said they are likely to raise rates this year, though they haven't specified precisely when. Economists expect an increase in September, according to a Bloomberg survey.
Sensitive Markets
How markets react when they do finally tighten is a source of concern for Fed officials, who have kept the benchmark federal funds rate near zero since December 2008. Chair Yellen and her colleagues are fretting that bond yields near record lows could surge once the Fed starts raising rates, according to minutes of their April meeting released this week.
Higher costs of everything from mortgages to car loans could result, potentially putting the fragile economic recovery at risk.
