Stocks Drop As Investors Fret About Inflation

Stocks sagged Thursday as nagging inflation worries further soured the enthusiasm over the Federal Reserve’s decision not to slow the economy with higher interest rates.

The Dow Jones industrial average quickly surrendered an early 19-point gain and then drifted through the session with a modest deficit, falling 32.56 to 7,258.13.

Smaller-company shares managed to post some gains, but most broad-market measures retreated as bonds fell again, briefly boosting the yield on the 30-year Treasury above 7 percent, a level at which the safety of fixed-income investments can seem more appealing than stocks.

Bonds have been struggling since Tuesday, when Federal Reserve officials opted not to raise the central bank’s lending rates.

“The bond market is saying the economic slowdown may not be sufficient to stop the Federal Reserve from raising rates in July or later,” said Rao Chalasani, chief investment strategist at Everen Securities in Chicago.

Advancing issues outnumbered decliners by a small margin on the New York Stock Exchange, where volume was fairly light at 426.95 million shares as of 4 p.m., down from 537.04 million on Wednesday.

Some of the stocks that moved substantially or traded heavily Thursday:

NYSE

Boeing, down 2-1/8 at 100-3/8.

The aircraft maker received a letter from the European Union’s executive agency objecting to Boeing’s proposed $13.3 billion takeover of McDonnell Douglas.

Cineplex Odeon, up 3/16 at 2-1/8.

Analysts said investors are betting that the Toronto-based movie theater chain will get a big boost from “The Lost World: Jurassic Park,” the Dow Jones News Service reported.

Hartford Life, up at 32-1/8 from initial offering at 28-1/4.

The insurer, a unit of Hartford Financial Services Group, sold 23 million shares for $28.25 apiece, raising $649 million in an initial public offering.

NASDAQ

RCSB Financial, up 6-1/4 at 40-1/4.

Charter One Financial agreed to buy RCSB for stock valued at $635 million, or $42.50 a share.

CFM Technologies, down 7-7/8 at 29-1/2.

The maker of cleaning equipment used in the production of computer chips and flat-panel displays plans to increase spending on development of new products.

Asyst Technologies, up 6-1/8 at 35.

Montgomery Securities started coverage of Asyst with a “buy” rating, the Dow Jones News Service reported.

Consilium, up 1-1/16 at 4-5/8.

Hambrecht & Quist upgraded the stock to “buy” from “hold.”