Stocks pared their losses Tuesday as the commodities and materials sectors got a boost from rising commodities prices.
Stocks got off to a weak start after a report showed wholesale inflation rose more than expected in November.
This broke a four-session winning streak for both the Dow and the S&P 500. The Dow, the S&P 500 and the Nasdaq all closed at 2009 highsMonday, with the Nasdaq now up more than 40 percent for the year.
Inflation at the wholesale levelsurged 1.8 percent in November, reflecting price jumps in energy and other products.
The jump in inflation comes as the Fed kicks off a two-day monetary-policy meeting today. Economists will be watching closely to see if the Fed keeps its pledge to keep rates low for an "extended period" — or if this inflation report is a game-changer that causes policy makers to temper that language.
But Joel Naroff of Naroff Economic Advisors pointed out that the pop in inflation at the wholesale level hasn't yet reached consumers.
"When it came to consumer goods, the changes were totally mixed, which tells me we don’t have a major, broad based price increase trend under way," Naroff wrote in a note to clients. "[T]he pathway from wholesale costs to retail prices is not direct so let’s not get too worried about inflation yet."
In the morning's other economic news: New York State manufacturing weakened unexpectedly in December, while industrial production rose a better-than-expected 0.8 percent in November.
The dollar rallied, hitting a 10-week high against the euro, amid worries about European banks and rising inflation after the PPI report.
Oil broke above $70 a barrel, snapping a nine-day losing streak, and gold was around $1,120 an ounce.
Stocks were lower across the board but Wells Fargo rose after the bank became the last of the major banks to repay its TARP funds, reaching an agreement with the government late Monday on paying back the $25 billion it received under the program.
The payback will come after Wells Fargo completes a $10.4 billion stock offering. That follows similar news from Citigroup earlier on Monday.
There was some controversy surrounding the Wells Fargo offering: The stock was delayed from opening for 50 minutes this morning so Goldman Sachs could allocate the 425 million shares, even though the books closed at 9 a.m. ET, which ticked off floor traders.