US shares lower as inflation picks up

NEW YORK (AFP) - Wall Street bulls took a breather on Friday after two weeks of gains, with shares mostly easing ahead of the weekend after a rise in a key inflation indicator.

At the close, the Dow Jones Industrial Average was down 57.32 points (0.34 per cent) at 16,639.97.

The broad-market S&P 500 lost 3.65 points (0.19 per cent) at 1,948.05.

But the tech-rich Nasdaq Composite managed a gain of 8.27 (0.18 per cent) to 4,590.47.

The market earned an early boost when the US Commerce Department revised its estimate of fourth-quarter economic growth higher to a 1 per cent pace, when a downgrade had been expected.

But analysts pointed out that it still confirmed the sharp slowdown at the end of last year and, in details on mounting inventories, suggests slow growth for the current quarter.

Later, a key sign of higher inflation pushed up bond yields and added support for the Federal Reserve's tightening program.

Core inflation, as measured by the personal consumption expenditures price index, was up 1.7 per cent year-on-year in January, getting closer to the Fed's 2 per cent target.

That gave a boost to bank shares, with Bank of America adding 3.1 per cent, Citigroup 2.3 per cent, and Goldman Sachs 1.4 per cent.

But retail stocks fell: Coca-Cola and Wal-Mart Stores both lost 2.3 per cent.

United Technologies fell 0.4 per cent after it again nixed a merger with Honeywell after the latter released the details of its US$90 billion (S$126 billion) offer. Honeywell dropped 1.1 per cent.

United Technologies chief executive Gregory Hayes said the offer "grossly undervalues" the company.

Chinese e-commerce giant Alibaba gained 0.4 per cent after a rebound in China's stock markets, and tech compatriot Baidu rocketed 9.9 per cent on a strong earnings report, with a 33 per cent rise in revenues in the fourth quarter.

Kraft Heinz surged 3.8 per cent after it beat estimates for earnings in the fourth quarter, at 62 cents per share versus 58 cents expected.