U.S. MARKET AVERAGES

Unexpected drop in crude oil and gasoline supplies sent oil prices sharply higher to overshadow the government's report of moderating inflation. Stocks were also helped in their retreat from recent advance by American Express which confirmed that the company will fail to meet Wall Street’s earnings expectations for the fourth quarter.

Earlier in the day, the Labor Department reported that consumer prices edged up just 0.2% in October, the best showing in four months. September consumer prices had soared by 1.2% on record energy prices. That inflation increase was the largest one-month jump in 25 years.

CPI report and better-than-expected net foreign purchases has sent the benchmark 10-year bond up 17 ticks and knocked its yield to 4.49%.

After the Energy Department released its latest report, crude futures rebounded and led to increased interest in energy stocks, sending the Energy sector up, helping the Dow and S&P back to higher ground.

The disk drive sector is pushing further lower on Wednesday, following yesterday’s decline the downgrade of SanDisk ((SNDK: chart). Adaptec (ADPT: chart) is another of Tuesday''s biggest drags on the group, leading the decline with a loss of 3.8%. The networking sector is also weak, falling by 1.1%.

Energy stocks were sitting modestly above the flat line just before the release of the government''s weekly petroleum inventory report, but news that oil inventories dropped, sent crude prices higher, which in turn gave a boost to energy stocks. The oil service space is now up about 2%. Smith International (SII: chart) is the best performing oil service stock, climbing by 3.6%. Transocean (RIG: chart), Baker Hughes (BHI: chart) and BJ Services (BJS: chart) are each showing gains of more than 2.5%.

Too, Inc. (TOO: chart) has jumped to a new 52-week high on quarterly earnings. Apple (AAPL: chart) is extending its high on speculations of possible prices changes in its iTunes music download service. Aetna (AET) and UnitedHealth (UNH) are other noteworthy stocks setting fresh peaks.

GM (GM: chart), which has been following the downtrend for a week and a half, is the most prominent stock setting a new 52-week low. Vodafone (VOD: chart) and Blockbuster (BBI: chart) are also extending their lows.

MOVERS AND SHAKERS

The homebuilder D.R. Horton (DRI: chart) raised its 2006 profit outlook after posting fourth-quarter results that beat expectations. The company''s strong performance could help relieve the worries that the sector is suffering a downturn caused by a profit warning from Toll Bros (TOL: chart) last week. D.R. Horton’s stock closed 0.3% down on Tuesday, but is expected to gain today.

The fashion retailer Abercrombie & Fitch (ANF: chart) boosted its full-year profit outlook after third-quarter results increased 79% to $71.6 million as compared to a year ago values. Sales during the quarter rose 35% to $704.9 million. The company’s shares added 4.3%.

The specialty apparel retailer The Talbots Inc. (TLB: chart) reported forecast-beating third-quarter profit and said its store traffic and sales performance made a significant progress in the second half of October. The stock fell 4.3% on Tuesday, but is likely to increase slightly today.

ECONOMIC NEWS

After a recent streak of gains, crude oil inventories dropped in the latest week, according to government data released Wednesday. Stocks of gasoline dipped as well.

The Department of Energy''s Energy Information Administration revealed that crude oil inventories fell by 2.2 million barrels for the week ended November 11, dropping to 321.4 million barrels from the 323.6 million barrels recorded in the previous week. This followed a recent streak of gains, including an advance of 4.5 million barrels for the prior week. Oil inventories are still 11.9% higher than their levels of the same time last year.

Gasoline inventories posted a week-over-week decline of 900,000 barrels, the government said, reversing a portion of the previous week''s advance of 4.2 million barrels. Gasoline stocks are now 2.9% below their levels of last year. Inventories of distillate fuel oil rose by 2.6 million barrels in the most recent week.

The Department of Labor released its closely watched report on consumer prices in the month of October on Wednesday, showing that prices rose modestly after surging higher in the previous month.

The report showed that consumer prices rose by 0.2 percent in October following a 1.2 percent increase in September. Economists had been expecting a slightly more modest increase of about 0.1 percent.

The significant slowdown in the pace of price growth compared to September came as energy prices fell 0.2 percent in October after surging up a record 12 percent in the previous month. Transportation prices also showed a notable decrease.