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Inflation Worries, Trade Gap Send Wall Street Lower

Higher oil prices and a near-record trade deficit combined to spark a Wall Street sell-off heading into the weekend.

The Dow lost 77.15 points, or 0.71 percent today to end the week at 10,774.36. After coming within 30 points of breaking the 11,000 barrier to start the week, the Dow was off 1.52 percent.

Inflation Pressures

The Nasdaq lost 18.12 points, or 0.88 percent on the session, closing at 2,041.60. For the week, which saw the five-year anniversary of its all-time high, the Nasdaq was the biggest loser, dropping 1.8 percent. The S&P 500 also lost ground, falling 9.17 points, or 0.76 percent on the session, to 1,200.08, a loss of 1.4 percent for the week.

The main culprit appeared to be inflation worries, brought on by word that the U.S. trade deficit rose to the second highest level on record, coming in at US$58.3 billion for January.

The Commerce Department said the gap was up 4.5 percent from the previous month and was up more than 24 percent for all of 2004, a record that many economists expect to be broken this year as oil prices remain high.

Investors chose to set aside a bullish midquarter forecast from Intel. Intel said after the markets closed yesterday that it would likely hit the high end of its revenue target for the current quarter and would have strong profit margins.

Oil and Jobs

A bullish report on consumer confidence, a shift caused by the resurgent job market, also fanned the inflation flames with fear that attitude could also help raise prices over time.

Oil prices dogged the markets all week as well. Today, oil futures rose 89 cents to close at $54.43 per barrel on the New York Mercantile Exchange.

While oil prices fluctuated some during the week, the recent trend has been decidedly higher as investors attempt to adjust the prices to reflect strong worldwide demand and the weaker U.S. dollar, which is the standard for trading oil around the world.

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