Stocks fall on inflation report

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NEW YORK -- Stocks sold off Friday after a jump in consumer inflation raised concerns about how much freedom the Federal Reserve has to continue cutting interest rates. The Dow Jones industrial average gave up more than 178 points.

The Labor Department said the consumer price index rose 0.8% in November amid a spike in gasoline prices. The report also found large increases in the cost of clothing, airline tickets and prescription drugs.

The report raises questions about the Fed's options for priming the economy. The Fed this week lowered interest rates and announced a plan to align with other key central banks and offer loans to pressed lenders around the world. But while it wants to stimulate the U.S. economy and make lending easier among banks wary of faltering debt, the Fed also has to keep a watchful eye on inflation.

Robert Dye, senior economist at PNC Financial Services Group, said the economic readings this week painted a mixed picture for investors, spurring some of the market's volatility.

"If you take the stronger-than-expected economic data we saw this week in the form of retail sales and add to that the inflation data and then combine that with a somewhat ambiguous statement from the Fed, you get a picture as clear as mud," he said.

The uncertainty weighed on the markets Friday, a day after stocks finished mixed. According to preliminary calculations, the Dow Jones industrial average fell 178.11, or 1.32%, to 13,339.85.

Broader stock indicators also fell. The Standard & Poor's 500 index dropped 20.46, or 1.37%, to 1,467.95, and the Nasdaq composite index fell 32.75, or 1.23%, to 2,635.74.

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