U.S. Stocks Shed Declines As Computer Buy Programs Kick In

NEW YORK (MarketWatch) -- U.S. stocks on Wednesday reversed course, climbing higher after earlier losses fueled by data illustrating rising inflation.

"Computer-generated buy programs kicked off at certain level in the S&P 500," said Art Hogan, chief market strategist at Jefferies & Co.

Off its earlier triple-digit declines, the Dow Jones Industrial Average was more recently up 17.66 points to 12,354.88, with 17 of its 30 components tallying gains.

The S&P 500 gained 2.7 points to 1,351.48, while the Nasdaq Composite rose 6.62 points to 2,312.82.

Ahead of the opening bell, the government reported U.S. consumer prices rose a seasonally adjusted 0.4% last month. The core consumer price index, which excludes food and energy costs, climbed 0.3% in January, the biggest gain since June 2006. .

"It doesn't bode well for inflationary concerns; it's a nagging problem for the Fed, which may have to temper some of the expected rate cuts, which is putting on lid on stock prices," said Robert Pavlik, chief investment officer at Oaktree Asset Management.

The CPI gains "added to the slew of evidence that U.S. inflation rates are indeed creeping upward as we enter the new year," said analysts at Action Economics.

Among the blue chips on the rise was Hewlett-Packard Co. , shares of which rose following the computer maker's solid earnings. .

As was the case on Tuesday, telecommunications stocks led among the blue-chip decliners, with AT&T Inc. off 5.6% and Verizon Communications down 3.5%.

Other sectors on the decline included drug stocks, with the Amex Pharmaceutical Index off 0.8% and the Amex Biotechnology Index down 1%. .

And, sparking new fears in the turbulent credit markets, KKR Financial Holdings said in a regulatory filing that it had delayed repaying debt on asset-backed paper and entered restructuring negotiations. Shares of KKR, an affiliate of private-equity giant Kohlberg Kravis Roberts & Co., fell 1.9%, recovering some of their earlier losses. .

In line with the market's recovery, the number of advancing stocks jumped just ahead of those declining on both the New York Stock Exchange and Nasdaq.

Crude slip

On Tuesday, a near-daylong rally in equities faded in the final hour or so after crude-oil futures closed above the $100 level for the first time. On Wednesday, crude futures were recently off 6 cents to stand at $99.95 a barrel on the New York Mercantile Exchange. .

Other early data from the government had the Commerce Department reporting a small January gain in the pace of new home construction. .

The housing data are "somewhat positive, but I don't think it's going to help the stock market right now, or the housing sector for that matter," said Pavlik.

Building permits, a forward-looking indicator, fell 3% for January, suggesting "continued construction cuts ahead as builders struggle with stubbornly high inventories and weak demand; the housing pain looks set to continue," said Michelle Meyer, a Lehman Brothers analyst.

Overseas, European shares fell for the first time in three sessions, led by brewers and telecom companies. .

By Kate Gibson