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NEW YORK (AP) - The latest inflation scare to grip Wall Street isn't by itself a good reason for equity investors to take cover, analysts say. Instead, they recommend looking for companies that have pricing power — the ability to pass on their higher costs to customers.
Costs for raw materials have been rising for a while, but signs that higher prices are starting to trickle down to consumers caused further alarm this week. The Dow Jones industrials slumped 95 points on Tuesday after Federal Reserve policymakers cited a pickup in inflation pressure as they again boosted short-term interest rates. A day later, the government reported the Consumer Price Index rose 0.4 percent in February as costs for everything from food and lodging to health care and education inched higher.
But inflation is still far from worrisome levels, said Tobias Levkovich, chief U.S. equity strategist at Citigroup's Smith Barney division. In fact, it wasn't so long ago that Wall Street was worried about deflation, he noted.
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