April 14 (Bloomberg) -- U.S. stocks fell after a government report showed consumer prices rose by more than forecast, heightening concern that the Federal Reserve will lift interest rates next quarter.

Benchmark indexes bounced between gains and losses throughout the day as investors weighed whether a rate increase would wilt optimism for corporate profits. Citigroup Inc. and Public Service Enterprise Group Inc. led the decline in financial and power companies, while DuPont Co. and Harley-Davidson Inc. rose after earnings exceeded forecasts.

``Signs of inflation, in some areas, really look a little more serious than people thought in the past,'' said Gil Knight, a fund manager at Gartmore Global Investments, which oversees $81 billion in West Conshohocken, Pennsylvania. ``It all points to interest rates moving up quicker than people thought and this is what's got the market upset.''

The Standard & Poor's 500 Index fell 2.46, or 0.2 percent, to 1126.98 as of 2:13 p.m. in New York. The Dow Jones Industrial Average lost 18.59, or 0.2 percent, to 10,362.69. The Nasdaq Composite Index shed 5.77, or 0.3 percent, to 2024.31.

More than three stocks fell for every one that rose on the New York Stock Exchange. Some 994 million shares changed hands on the Big Board, 10 percent more than the same time a week ago.

Consumer Prices

Prices paid by U.S. consumers in March increased 0.5 percent, boosted by mounting energy costs, transportation and clothing costs, the Labor Department said. Economists had projected a 0.3 percent gain in the consumer price index, based on a Bloomberg News survey.

Yesterday's report that U.S. retail sales had their biggest jump in a year last month, a sign economic growth is accelerating, piqued concern the Fed's rate increase will come earlier than expected. Economists predict the Fed will lift the overnight lending rate in the fourth quarter to stem a rise in inflation, according to a Bloomberg News survey.

``It's weighing on people's minds,'' said Peter Maher, who helps manage $1 billion at Bryn Mawr Trust Wealth Management in Bryn Mawr, Pennsylvania. ``If the bond market is telling us anything, we are going to see'' a rate increase this year, he said.

The yield on the benchmark 10-year Treasury note climbed 4 basis points, or 0.04 percentage point, to 4.39 percent.

Higher interest rates reduce the value of bonds owned by banks, brokers and insurers, and also crimp demand for mortgages and loans. They make dividend-paying stocks less attractive to investors who seek income, and utilities yield bigger annual payouts to shareholders than any of the S&P 500's nine other industry groups.

Citigroup

Citigroup lost 61 cents to $50.59. Countrywide Financial Corp. slipped $1.27 to $56.02. Public Service Enterprise fell for an eighth straight day, losing 33 cents to $44.76. Southern Co. also declined for an eighth day, shedding 17 cents to $29.04.

Better-than-forecast profits limited the market's declines.

``In the end, earnings are going to hold the day,'' said Allan Meyers, who manages more than $1 billion for Fifth Third Bank in Grand Rapids, Michigan. ``As companies come out and meet or exceed expectations, the market's going to go higher. We've got a little bit of fear for higher interest rates because we've seen some relatively good economic numbers. But I don't see the Fed raising rates within the next month.''

DuPont Gains

DuPont, the No. 2 U.S. chemical maker, rose $1.20 to $44.89. The company said it earned 95 cents a share, excluding certain costs, in the first quarter. It had predicted quarterly profit of 65 cents to 75 cents.

Harley-Davidson, the largest U.S. motorcycle maker, added $2.73 to $58.36. The stock's 4.9 percent climb was the second- biggest within the S&P 500. The company said first-quarter profit rose 9.9 percent on record U.S. demand for its namesake cruisers and higher sales of parts and accessories.

Parker Hannifin Corp., the world's biggest supplier of hydraulic equipment, gained $2.38, or 4.2 percent, to $59.05, for the third-biggest increase in the S&P 500. The company said third- quarter profit was 90 cents a share, higher than it had expected, as the rebounding economy helped boost sales.

Intel Corp., the world's biggest maker of semiconductors, dropped 19 cents to $27.48 after the company said second-quarter sales growth may slow, missing forecasts. Revenue will be $7.6 billion to $8.2 billion. On average, analysts polled by Thomson Financial had forecast $8.09 billion. Sales growth may slow to as little as 12 percent after exceeding 20 percent for the past three quarters.

Falling Short of Estimates

Several companies reported results that fell short of estimates, pushing their shares lower.

Take-Two Interactive Software Inc. sank $3.65 to $31.55. The maker of ``Grand Theft Auto'' video games forecast a second- quarter loss of 15 cents a share on $170 million in sales. It had estimated 33 cents in profit and $220 million in revenue. The company cited a delay in the release of its ``Red Dead Revolver'' game. Jeffrey Lapin stepped down as chief executive, and the company named Richard Roedel as interim chief.

HCA Inc., the biggest U.S. hospital chain, dipped $2.99 to $39.61. The stock's 7 percent decline was the steepest in the S&P 500. The company said 2004 profit will be $2.60 to $2.70 a share, less than its earlier forecast of as much as $2.95. First-quarter earnings fell short of expectations as more patients failed to pay their bills.

McDonald's Corp., the world's No. 1 restaurant chain, slumped $1.84 to $26.43. U.S. sales in March rose 10 percent, less than the 13 percent analysts had forecast.

Tenet Healthcare Corp., the second-biggest U.S. hospital chain, lost 36 cents to $10.62. Los Angeles prosecutors have requested documents related to investigations of two of the company's California hospitals, Tenet said. Federal authorities have been scrutinizing the company's billing and relationships with doctors since Tenet disclosed in November 2002 that it used price increases to trigger higher payments from the government Medicare program for the elderly and disabled.

To contact the reporter on this story: Justin Baer at jbaer1@bloomberg.net

Last Updated: April 14, 2004 14:15 EDT