US Market Update...

An unexpected surge in inflation drove U.S. stocks to their first decline in three days and erased all of last week's rebound on concern the Federal Reserve is unlikely to lower interest rates this year.

American Express Co. and Citigroup Inc., whose profits rise when borrowing costs fall, sent the Dow Jones Industrial Average to its sixth weekly loss this year and worst start since 2003. Energy shares slid the most in the Standard & Poor's 500 Index, led by Exxon Mobil Corp., as oil reached a six-week low.

The 0.4 percent rise in prices paid by consumers in February offset the biggest increase in industrial production since 2005 and stirred speculation the Fed will be hampered in efforts to restore economic growth. Consumer confidence fell to a six-month low, deepening concern the economy is slowing.

``There has been the feeling that the Fed may be forced to lower rates,'' said Stanley Nabi, who helps oversee about $8 billion at Silvercrest Asset Management in New York. Higher inflation ``will prevent the Fed from reducing rates.''

The Dow Jones Industrial Average fell 49.27, or 0.4 percent, to 12,110.41. The Standard & Poor's 500 Index retreated 5.33, or 0.4 percent, to 1386.95, while the Nasdaq Composite Index declined 6.04, or 0.3 percent, to 2372.66.

Stocks retreated this week on speculation home-loan defaults will curb economic growth. Today's inflation report comes a day after the government said wholesale prices also increased more than expected last month.

Less Appealing

The dollar fell to the lowest level this year against the euro and dropped versus the yen on concern a slowing economy is reducing the appeal of U.S. investments.

``Inflation is stubbornly above the Fed's comfort zone, but growth is well below expectations,'' said Tim Mazanec, senior currency strategist in Boston at Investors Bank & Trust Co. ``That's not a strong-dollar scenario.''

The dollar declined 0.54 percent to $1.3310 per euro and dropped 0.71 percent to 116.74 yen in New York.

Crude oil in New York fell to a six-week low on reduced concern that Iranian supplies will be curtailed after Iran's President Mahmoud Ahmadinejad asked to address the United Nations Security Council.

Ahmadinejad will be issued a U.S. visa so he can speak to the Security Council next week, according to Benjamin Chang, a spokesman for the U.S. mission to the UN. China and Russia agreed with the U.S. and its allies to pressure Iran by freezing the assets of a state-owned bank and the Iranian Revolutionary Guard Corps, and restricting travel by their officials.

Oil `Spooked'

``I think the oil market is spooked by the visit to New York next week by President Ahmadinejad,'' said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. ``The Iranians want to buy time and the best way for them to do that is for him to give a conciliatory speech at the UN.''

Crude oil for April delivery fell 44 cents, or 0.8 percent, to settle at $57.11 a barrel in New York, the lowest close since Jan. 30.

U.S. Treasuries rose this week amid a decline in equities and an increase in home-loan delinquencies among the riskiest borrowers. Treasury yields have largely moved in the same direction as U.S. stocks this month as a rout in global equities increased investors' demand for the safest government debt.

Subprime `Fear'

``We're seeing money flow out of equities and into bonds,'' said Andy Richman, who oversees $10 billion in fixed-income assets as a strategist in West Palm Beach, Florida, for SunTrust Bank's personal asset management division. ``There's fear in the stock market that the subprime story still has some legs.''

The yield on the 10-year note increased 1 basis point, or 0.01 percentage point, to 4.55 percent in New York, according to bond broker Cantor Fitzgerald LP. The price of the 4 5/8 percent security maturing in February 2017 fell 3/32, or 94 cents per $1,000 face amount, to 100 5/8. Bond prices move inversely to yields.

Gold prices in New York rose as the dollar slid, boosting the metal's appeal as an alternative investment.

Gold, which typically trades in the opposite direction of the dollar, has gained 18 percent in the last year as the U.S. currency has fallen 8.6 percent against the euro.

``The dollar's weakness is having a lot to do with gold prices today,'' said Frank Lesh, a trader at FuturePath Trading LLC in Chicago.

Gold futures for April delivery gained $6.80, or 1.1 percent, to $653.90 an ounce in New York. Prices have risen 2.5 percent this year.