NEW YORK (AP) – Wall Street fell moderately Monday in an erratic session dominated by worries about inflation – which were somewhat soothed by a steep drop in the price of oil.

Light, sweet crude closed down $3.69, or 2.9 percent, to settle at $121.41 a barrel on the New York Mercantile Exchange after Tropical Storm Edouard seemed unlikely to threaten oil and natural gas facilities in the Gulf of Mexico. It was the lowest settlement price since May 5 and left crude down nearly 20 percent from its July 11 high of $147.27.

According to preliminary calculations, the Dow Jones industrial average fell 42.17, or 0.37 percent, to 11,284.15. The Dow had been down more than 100 points in early trading.

Broader stock indicators also declined. The Standard & Poor’s 500 index fell 11.30, or 0.90 percent, to 1,249.01, and the Nasdaq composite index declined 25.40, or 1.10 percent, to 2,285.56.

Many investors appeared to trade cautiously ahead of the Fed’s meeting. The central bank is expected to keep interest rates steady at 2 percent, given the recent underwhelming readings on the economy. Inflation rose sharply for businesses in June as they paid higher prices for commodities, but it appears to have eased in July as the price of oil retreated in the second half of the month. That might take pressure off the Fed to raise rates as a means of containing inflation.

Bond prices fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.98 percent from 3.94 percent late Friday. The dollar rose against other major currencies, while gold prices fell.

Investors seemed unmoved by a Commerce Department report that orders to U.S. factory jumped at the fastest pace in six months in June. The report reflected increases in petroleum prices and heavy demand for military equipment. Orders rose by 1.7 percent in June, more than double what had been expected. It was the biggest gain since December.

Steven Goldman, chief market strategist at Weeden & Co., said the up-and-down trading since Wall Street’s recent lows in July are part of a necessary process as the market searches for a bottom.

“We’re kind of going through a period of healing and trying to maybe etch out some kind of bottom,” he said. “A lot of times you just don’t reach a bottom and go straight up.”

Goldman pointed to encouraging signs like drops in commodities beyond oil as well as declines in the number of stocks hitting new lows.

Meanwhile, U.S. corporate earnings reports for the second quarter were still arriving, but Monday’s flow was lighter. Cisco Systems Inc., News Corp. and Procter & Gamble Co. all report earnings Tuesday.

Cisco fell ended unchanged at $21.99, News Corp. advanced 17 cents to $14.57 and P&G rose 87 cents to $65.82.

Declining issues outnumbered advancers by about 2 to 1 on the New York Stock Exchange, where volume came to 1.23 billion shares.

The Russell 2000 index of smaller companies fell 12.02, or 1.68 percent, to 704.14.

Overseas, Japan’s Nikkei stock average fell 1.23 percent. Britain’s FTSE 100 fell 0.64 percent. Germany’s DAX index fell 0.73 percent, and France’s CAC-40 lost 0.78 percent.

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