Stocks Edge Down; Oil, PPI Data Weigh

NEW YORK (Reuters) - U.S. stocks declined slightly on Thursday, as a jump in oil prices and a surge in producer prices last month stoked inflation worries, overshadowing other data that pointed to the recovering U.S. economy.

Jabil Circuit Inc. (NYSE:JBL - News) ranked second among the New York Stock Exchange's top percentage losers, a day after it forecast earnings weaker than Wall Street estimates, despite posting quarterly earnings that rose nearly nine-fold.

Network equipment maker Cisco Systems Inc. (NasdaqNM:CSCO - News) pressured the technology-laden Nasdaq, dragging down the Standard & Poor's Communications Equipment Index (^GSPCOMM - News) nearly 2 percent, making it the S& 500's biggest percentage losing sector.

Producer prices rose at their fastest pace in a year in May, putting inflation concerns in focus, while a June regional factory index rose and jobless claims fell in fresh signs of a strong U.S. economy. The overall May PPI jumped 0.8 percent, exceeding Wall Street's forecast for a gain of 0.6 percent, while the core PPI, which excludes volatile food and energy prices, rose 0.3 percent, outstripping the forecast for a 0.2 percent increase.

"The (producer price index) came in way above expectations. It caused some concerns about the potential for a 50-basis- point ratchet" on June 30, the second day of the Fed's two-day meeting, "rather than a 25-basis-point rise," said Jeffrey Saut, chief investment strategist at Raymond James Financial in St. Petersburg, Florida.

The Dow Jones industrial average (^DJI - News) eased 2.06 points, or 0.02 percent, to 10,377.52, while the broader S& 500 Index (CBOE:^SPX - News) slipped 1.51 points, or 0.13 percent, to 1,132.05, based on the latest figures. The Nasdaq Composite Index (NasdaqSC:^IXIC - News) declined 14.56 points, or 0.73 percent, to 1,983.67.

The Federal Reserve's policy-setting committee meets June 29-30, and is widely expected to raise its fed funds rate, or the rate for overnight bank loans, from its current 1958 low of 1 percent, in an effort to curb budding inflation.

Fed chief Alan Greenspan has said rates would move up at a "measured" pace, but a pickup in inflation has heightened worries the central bank may need to move more aggressively.

In another report, the Conference Board, a private business group, said its index of leading economic indicators rose 0.5 percent in May to 116.5, suggesting the U.S. economy's momentum will likely continue in the coming months.

Crude oil for July delivery ended 3 percent higher, up $1.14 at $38.46 a barrel, on the New York Mercantile Exchange, amid uncertainty over when Iraq can restore exports, which were shut down earlier this week due to attacks on pipelines.

U.S. Treasury bond prices rose, sending the yield of the benchmark 10-year note down to 4.69 percent from 4.72 percent late Wednesday.

"On one hand, we have a bond market that's doing well, and long-term rates are going down. But on the other hand, oil prices are going up. That's why the stock market is stuck," said Hugh Johnson, chief investment officer at First Albany Corp.

News of two bombings in Iraq on Thursday also weighed on sentiment. A suicide bomber blew up his car at an army recruiting base in Baghdad, killing 35 people and wounding 138 in Iraq's deadliest single bombing since a suicide attack on the same target killed 47 in February.

A car bomb later killed six paramilitary civil defense guards north of the Iraqi capital.

NYMEX July gasoline futures settled 3.6 percent higher, up 4.09 cents at $1.1871 a gallon.

Trading was active, with about 1.3 billion shares changing hands on the New York Stock Exchange, below the 1.4 billion daily average for last year. About 1.45 billion shares were traded on Nasdaq, below last year's 1.69 billion daily average.

Shares of Jabil, a contract maker of electronic components, sank 12.7 percent, or $3.56, to $24.49.

Topping the NYSE's most-active issues was Nortel Networks (NYSE:NT - News), up 31 cents, or 7.6 percent, at $4.40, while Cisco led the Nasdaq's most actives. Cisco ended off 52 cents, or 2.2 percent, at $23.36.

Cisco's CEO John Chambers said on Thursday that the world's largest Internet router maker would relish teaming up with Nortel Networks(Toronto:NT.TO - News), North America's biggest telecom equipment supplier.

Other contract electronics manufacturers' shares also fell. Flextronics'(NasdaqNM:FLEX - News) stock fell 6.5 percent, or $1.07, to $15.31.

Among other active Nasdaq names, Microsoft Corp.(NasdaqNM:MSFT - News) rose 44.9 cents, or 1.6 percent, to $27.769. Intel Corp. (NasdaqNM:INTC - News) eased 49 cents, or 1.7 percent, to $27.63. Microsoft and Intel, also among the 30 stocks that make up the Dow, had opposite effects on the blue-chip average. Microsoft was the Dow's biggest percentage gainer and helped limit its losses, while Intel weighed on the Dow.

In earnings news, Accenture Ltd. (NYSE:ACN - News) shares rose, after it reported preliminary quarterly earnings sharply above analysts' estimates, driven by strong demand for outsourcing and improvements in its consulting business.

Shares of Accenture, one of the world's biggest consulting companies, shot up $1.48, or 5.9 percent, to $26.79.



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