A higher-than-expected rise in consumer prices stoked anxiety over interest rates, sending stocks down substantially before they stabilized near unchanged levels. Analysts said the muted sell-off shows investors understand that the economy remains in good health.

"The good news is that the recovery appears firmly in place, with stronger employment, strong retail sales and good corporate profit reports," said Rick Giesen, director of value equity for National City Investment Management in Cleveland. "The bad news is on the inflationary front, and that some of the fears about a rate tightening are negatively impacting stocks and bonds."

According to preliminary calculations, the Dow Jones industrial average slipped 3.33, or 0.03 percent, to 10,377.95, following a 1.3 percent drop in the previous session.

The broader gauges were also lower. The Nasdaq composite index sagged 5.23, or 0.3 percent, to 2,024.85, after a 1.7 percent decline yesterday. The Standard & Poor’s 500 index was down 1.27, or 0.1 percent, at 1,128.17, after a 1.4 percent loss.

Renewing concerns about inflation, the Labor Department reported that consumer prices rose by 0.5 percent in March, higher than the 0.3 percent advance forecast by economists. The increase in the Consumer Price Index, the government’s most closely watched inflation barometer, was propelled by more expensive gasoline, airfares and clothing.

The Federal Reserve has been slow to raise the key short-term interest rate off its current 45-year low in part because of the long period of low inflation. But Fed Chairman Alan Greenspan and other policy makers have indicated a change is coming, though they haven’t said when.

Strong retail sales for March, reported yesterday, and improving labor market data had already stirred fears among investors that a rate hike will come sooner rather than later. Lehman Brothers predicted the Fed could act as early as September, instead of sometime in 2005 as the brokerage firm previously believed.

Interest-rate sensitive stocks, such as financials, suffered as rate-wary investors moved assets into more cyclical areas, like the pharmaceutical and health care sector. Bank of America Corp. fell 41 cents to $80.09, despite reporting earnings that beat analyst expectations. Other financial stocks also declined on rate fears, including American Express was down $1.60 at $49.80 and J.P. Morgan Chase & Co lost 77 cents to $39.27. Several drug companies rose. Johnson & Johnson added $1.21 to $52.60 and Pfizer Inc. was up 42 cents at $35.81.