Financial Markets                      03/18 09:33

   

   NEW YORK (AP) -- U.S. stocks are drifting lower Wednesday after another rise 
in oil prices raised worries about inflation, which may have been primed to 
worsen even before the war with Iran began.

   The S&P 500 slipped 0.2% and was on track for its first loss this week. The 
Dow Jones Industrial Average was down 179 points, or 0.4%, as of 10 a.m. 
Eastern time, and the Nasdaq composite was 0.2% lower.

   Stocks fell under the pressure of a 2.6% climb for the price of a barrel of 
benchmark U.S. crude to $98.00. Brent crude, the international standard, rose 
5.4% to $108.99 per barrel.

   Oil and natural gas prices have been spiking since the war began because of 
disruptions to the production and transportation of energy in the Persian Gulf. 
Iran's state television said Wednesday that the Islamic Republic would be 
attacking oil and gas infrastructure in Qatar, Saudi Arabia and the United Arab 
Emirates after an attack on facilities associated with its offshore South Pars 
natural gas field.

   If the disruptions keep oil and gas prices high for long, they could send a 
debilitating wave of inflation crashing into the global economy.

   A report released Wednesday morning showed that inflation pressures were 
already worsening before the war began. It said inflation at the U.S. wholesale 
level unexpectedly accelerated last month to 3.4%, and those cost increases 
could hit U.S. households if producers pass them all along.

   Such numbers strengthened Wall Street's virtual consensus that the Federal 
Reserve will announce that it's keeping interest rates steady this afternoon 
following its latest meeting, instead of resuming its cuts.

   Cuts would give the job market and investment prices a boost, and President 
Donald Trump has been angrily calling for them. But lower interest rates would 
also worsen inflation.

   More important for Wall Street is whether Fed officials will say they still 
think one cut to rates may be possible over the course of 2026. That's what the 
median member said in December, the last time Fed officials published such 
expectations.

   The Iran war has made it difficult for anyone to make economic forecasts. 
Gasoline prices are soaring and will push up inflation for at least the next 
month or two. The average price for a gallon of gasoline spiked again 
overnight, reaching $3.84. It was well under $3 last month.

   Global oil flows remain largely constrained, ING Bank analysts Warren 
Patterson and Ewa Manthey wrote in a research note on Wednesday, even as hopes 
were growing that Iran might be allowing more vessels through the Strait of 
Hormuz, a key waterway for global oil and gas transport.

   Roughly a fifth of the world's crude oil passes through the strait, which 
has been largely closed as Iran blocks ships linked to the U.S., Israel and 
their allies.

   On Wall Street, mixed profit reports helped keep the market in check.

   Macy's jumped 8.2% after reporting stronger profit and revenue for the 
latest quarter than analysts expected. The retailer behind Bloomingdale's and 
Bluemercury is in the midst of a turnaround plan to drive growth under CEO Tony 
Spring.

   But General Mills slipped 1% after the company behind the Pillsbury, 
Progresso and Wheaties brands reported a weaker profit for the latest quarter 
than analysts expected. CEO Jeff Harmening is investing in its brands in hopes 
of driving growth, and it's sticking with its forecast for profit over the full 
fiscal year.

   In the bond market, Treasury yields ticked higher following the 
higher-than-expected update on inflation at the wholesale level. The yield on 
the 10-year Treasury rose to 4.22% from 4.20% late Tuesday and from just 3.97% 
before the war with Iran started.

   In stock markets abroad, indexes were mixed in Europe following a stronger 
finish in Asia. They reacted to the rise in the price of crude, which 
accelerated as trading headed westward around the world.

   Tokyo's Nikkei 225 rallied 2.9% after the government reported exports in 
February were higher than expected. South Korea's Kospi leaped 5%.

   ___

   AP Business Writers Chan Ho-him and Matt Ott contributed.

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