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Stocks closed mixed on being hit by a disappointing earnings outlook from Hewlett-Packard Co. and news that consumer prices rose more than expected in January, which fueled concern about inflation. However, minutes from the Federal Reserve’s last meeting on interest rates, showed that the Fed wasn’t overly concerned about inflation at the end of January, and somewhat soothed the market’s worries.

Today, the Dow closed down 48.23 or 0.4% to 12,738.41, the broader S&P 500 closed down 2.05 to 1,457.63, and the tech-fueled Nasdaq closed up 5.38 to 2,518.42.

Market breadth was negative. On the New York Stock Exchange, losers beat winners 17 to 15 on volume of 1.43 billion shares. On the Nasdaq, decliners topped advancers by a narrow margin on volume of 2.06 billion shares.

Investors digested the release of the minutes from the last Federal Reserve policy meeting which reiterated what they have been saying lately, that the economy is moderating but not too quickly, and that inflation remains a concern, even though it seems to be waning. The afternoon also brought comments from a trio of Fed officials that built on the same message of the economy slowing at a reasonable pace, but inflation remaining a worry.

The morning’s Consumer Price Index showed a surprising resilience in a key inflation measure. The CPI rose 0.2% versus expected rise of 0.1%, while the core CPI rose 0.3%, above forecasts for a 0.2% gain. The report was a surprise to investors looking for a further confirmation that pricing pressure is waning.

Shares of Arcelor Mittal closed 1.6% higher, after reporting a 3.5% slip in 2006 net income due to a higher tax rate and also said it will distribute $2.4 billion to shareholders via a dividend and share buybacks. Full-year pro-forma profit fell to $7.97 billion from $8.26 billion.

Stock of Hewlett-Packard closed down $2.03 or 4.7% to $41.10, despite reporting quarterly sales and earnings that increased from a year earlier and topped estimates. The company also forecast fiscal year 2007 sales and earnings in a range that beats analysts’ forecasts. Its net income rose to $1.5 billion, up 26% from $1.2 billion a year ago.

Shares of NovaStar Financial closed down $7.46 or 42.5% to $10.10, after it reported a fourth-quarter and said it would have little or no taxable income next year. It reported a loss of $14.4 million, compared with a year-earlier profit of $28.1 million.

Stock of United Technologies Corp. slipped 0.8%, as one of its unit Otis was fined a total of $1.3 billion by the European Commission for allegedly rigging prices to install and maintain escalators and elevators. The fine narrowly tops the 855 million euro penalty against eight vitamin makers in 2001 and a recent 750 million euro fine for electrical generation equipment makers.

U.S. light crude oil for April delivery jumped $1.22 to settle at $60.07 a barrel on the New York Mercantile Exchange, a gain of over two percent.

All the best,
Manuel Jesus-Backus
The Portfolio Crafter
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