With the market already alarmed at the prospect of an interest rate hike next month, the government’s report of a higher-than-expected increase in wholesale prices raised concerns that the Federal Reserve might raise interest rates by more than the quarter percentage point Wall Street has expected.

A late-morning rally showed signs of life for stocks, but pessimistic investors quickly took advantage of the short-lived rise to lock in what gains they could.

"We had a really nice rally yesterday, but technically, the market doesn’t look all that great," said Todd Leone, managing director of equity trading at SG Cowen Securities. "I think we’ll be in a lower range for a while. We might see a rally when the Fed finally raises rates, actually."

According to preliminary calculations, the Dow Jones industrial average was down 34.42, or 0.3 percent, at 10,010.74.

Broader stock indicators were narrowly mixed. The Standard & Poor’s 500 index lost 0.81, or 0.1 percent, to 1,096.47, while the Nasdaq was up 0.44, or 0.02 percent, at 1,926.03.

The Labor Department said wholesale prices climbed 0.7 percent in April, the largest increase in a year, spurred on by higher dairy and gasoline prices. However, excluding food and energy prices, "core" wholesale prices rose by only 0.2 percent, matching economists’ estimates.

A drop in retail sales in April, as reported by the Commerce Department, was no help to the markets, although it showed a weakening of consumer demand. Sales fell 0.5 percent, bogged down by lagging auto sales. Analysts had expected a modest 0.1 percent rise in sales.

In addition, new applications for unemployment benefits rose last week by 13,000 to 331,000, according to the Labor Department. The increase, while larger than expected, still suggested the job picture is improving, which has been a key factor in the Fed’s interest rate deliberations.

"All that data added up to a mixed bag," said Bryan Piskorowski, market analyst at Wachovia Securities. "The consumer prices might give us better direction on Friday, but until then, we’re going to keep bouncing around here. We’re in the badlands, and we’ll stay there until the Fed acts."

Until the Fed meeting in June, the overall unpredictability will turn into anxiety, and many analysts believe the selling might not be over. On the other hand, there’s an opportunity to buy stocks at good prices for the brave.

"Markets prefer predictability to uncertainty. Right now, the degree of uncertainty has risen, and it’s risen faster than we expected," said Jack Caffrey, equities strategist at J.P. Morgan Private Bank. "Investors are being legitimately more careful than they were months ago.

Another round of strong earnings reports was largely ignored by risk-sensitive investors. The Walt Disney Co. beat Wall Street expectations for its earnings by 5 cents per share, and raised its 2004 outlook for the second time. Disney was up 30 cents at $23.30.