Stocks sank yesterday as strong economic numbers were eclipsed by mixed corporate results, including disappointing earnings from megabank...

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NEW YORK — Stocks sank yesterday as strong economic numbers were eclipsed by mixed corporate results, including disappointing earnings from megabank JPMorgan Chase.

The Dow Jones industrial average fell 88.82 to 10,539.97.

Microsoft, one of the 30 Dow stocks, slipped 34 cents to close at $25.98 a share. Boeing, also a Dow stock, fell 47 cents to $51.41.

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The broader gauges also fell. The Standard & Poor’s 500 index slipped 11.35 to 1,184.63. The Nasdaq composite index lost 32.45 to 2,073.59.

Overall, profits have come in somewhat better than expected, but rising worries about slowing corporate growth have muted the market’s reaction even to good news. The prospect of higher interest rates is another looming concern. And while economic numbers have been solid, the fact that inflation rose during 2004 at the fastest pace in four years exacerbated those concerns.

“So far, the season is not all that negative. I think what’s happening is … the market is suffering from the fears of a possible hawkish Federal Reserve going forward,” said Peter Cardillo, chief strategist at S.W. Bach, who noted a number of other worries, including lofty oil prices ahead of what could be a problematic election in Iraq on Jan. 30. “There are several fear factors overshadowing the earnings season.”

Inflation rose at the fastest pace since 2000 last year as a surge in fuel bills sent the Consumer Price Index climbing 3.3 percent, the Labor Department reported. Consumer prices rose just 1.9 percent in 2003. There could be some relief ahead, however; lower energy prices in December led to a 0.1 percent drop in retail prices. Economists hope that 2005 will turn out to be a calmer year on the energy front.

In other economic news, the Commerce Department reported residential construction rose for a fourth straight year following a jump in construction of new homes in December.

Separately, the Labor Department announced new claims for unemployment benefits fell last week by the largest amount in more than three years, easing concerns raised by layoffs over the previous two weeks.

In another report, the Federal Reserve released its latest snapshot of business activity around the country — known as the Beige Book — showing that 11 of its 12 regional banks reported the economy continued to expand through early January with shoppers and tourists keeping stores busy. Only the Cleveland district, which covers the hard-hit Rust Belt manufacturing industries, was not upbeat, reporting “mixed” activity during the period.

“We are entering 2005 with a lot of momentum. We have a strong job market, a soaring housing market and growth that is broad-based across the country,” said Mark Zandi, chief economist at Economy.com.

The Fed report, which will be used when policy-makers meet to set interest rates Feb. 1-2, found no areas of worrisome inflation, saying that “wage pressures generally remained modest,” confirming the CPI findings.

For most investors, the focus was on earnings, which were just not good enough to inspire buyers. One of the biggest letdowns came from Dow industrial component JPMorgan Chase, which missed estimates, causing the entire banking sector to sag.

“I think generally people were expecting that we’d have decent numbers from JPMorgan,” said Som Dasgupta, managing director of trading at PNC Bank in Pittsburgh. “Nobody was expecting their profits to fall.”

JPMorgan Chase shed 56 cents to $37.84 after saying its profits had fallen 11 percent in the fourth quarter.

Information on the Federal Reserve’s regional outlook provided by Associated Press reporter Martin Crutsinger.