US STOCKS-Wall St slips on inflation concern

                                
 
                                
 * Fed starts two-day meeting
                                
 * Producer Price Index rises
                                
 * U.S. dollar index at highest since October
                                
 * Dow off 0.4 pct, S&P off 0.4 pct, Nasdaq off 0.1 pct
                                
 * For up-to-the-minute market news, click [STXNEWS/US]
  (Updates to late afternoon, changed byline)
                                
 By Chuck Mikolajczak
                                
 NEW YORK, Dec 15 (Reuters) - U.S. stocks fell on Tuesday,
with the Dow and S&P 500 moving off 14-month highs, as a climb
in producer prices raised inflation concerns.
                                
 Investors were mindful of making big bets ahead of the
Federal Reserve's latest assessment of the U.S. economy. Of
note will be the Fed's view of the 1.8 percent surge in the
November Producer Price Index. The Fed's policy-making
statement is due on Wednesday afternoon.
                                
 Although the market does not anticipate any changes in the
Fed's current policy of holding U.S. interest rates near zero,
even a slight change in the Fed's tone can cause an impact on
investor sentiment as cheap money has been one of the main
agents of the stock market's rally. For details, see
[ID:nN15217719]
                                
 Investors "are more worried about (inflation) today than
they were yesterday, and that is based on the PPI data, which
was a surprise," said Lawrence Creatura, portfolio manager at
Federated Investors in Rochester, New York.
                                
 "There has been a tug of war between investors who believe
inflation or deflation will be the next threat we face and
today's data indicates that maybe it's going to be inflation."
                                
 The Dow Jones industrial average <.DJI> dropped 38.54
points, or 0.37 percent, to 10,462.51. The Standard & Poor's
500 Index <.SPX> fell 4.39 points, or 0.39 percent, to
1,109.72. The Nasdaq Composite Index <.IXIC> shed 2.68 points,
or 0.12 percent, to 2,209.42.
                                
 The Fed's two-day policy-setting meeting started at 2
p.m.(1800 GMT) and will conclude with a statement on the
economy expected on Wednesday around 2:15 p.m. (1815 GMT).
[ID:nN15231980]
                                
 Investors will also focus on the Consumer Price Index for
November, also due Wednesday, for a more detailed picture of
inflationary pressures. Overall CPI is forecast to have risen
0.4 percent in November, compared with a 0.3 percent increase
in October, according to economists polled by Reuters.
                                
 Crude oil <CLc1> gained 1.7 percent above $70 a barrel,
boosting shares of energy and materials companies. Chevron
<CVX.N> rose 0.7 percent to $77.81 and the PHLX Oil
 Service Sector index <.OSX> rose 1.8 percent.
                                
 The U.S. dollar strengthened against the euro, and the
dollar index <.DXY> rose 0.8 percent, touching its highest
level in 2-1/2 months.
                                
 In recent weeks, the connections among equities and the
dollar, oil and gold have loosened, with those assets trading
more independently of one another.
                                
 For an illustration of those assets in 2009, see
http://graphics.thomsonreuters.com/129/US_DGSPB1209.gif
                                
 General Electric Co <GE.N> shares fell slightly after the
conglomerate forecast a 5 to 10 percent decline in 2010
revenue. [ID:nWEN7570]. GE edged down 0.5 percent to $15.87.
                                
 Best Buy Co <BBY.N> shares fell 8.3 percent to $41.62 after
the top U.S. electronics chain forecast gross margins in the
current holiday quarter would be lower than expected.
[ID:nN14195670]
                                
 Wells Fargo & Co <WFC.N> shares added 0.6 percent to $25.66
after it sold $10.65 billion in stock, raising funds to help
repay a U.S. government bailout. [ID:nN15220741].
                                
 Serving to curb losses on the Nasdaq, News Corp <NWSA.O>
was up 2.1 percent at $15.44 after a ratings upgrade by
Deutsche Bank, while Adobe Systems Inc <ADBE.O> gained 2
percent to $36.48 ahead of its earnings scheduled for after
Tuesday's close.
                                
 The market, up more than 60 percent from the 12-year lows
in March, has slowed its advance in recent weeks with thin
volume, as traders look to lock in year-end profits and seek
clues about stocks' direction for
2010.
                                
 (Editing by Kenneth Barry)