NEW YORK (AP) – Stocks carved modest gains yesterday, reversing early losses as investors appeared to digest unpleasant signals about the economy with unusual equanimity and draw comfort from the notion that the Federal Reserve didn’t appear overly concerned about inflation.

Investors initially upset over a rise in consumer prices and lackluster readings on home construction seemed to set aside some of their concerns after minutes from the Fed’s meeting last month didn’t reveal sizable concerns about inflation. The central bank did lower its expectations for the economy this year amid weakness in the credit markets and in housing – a development that wasn’t likely surprising to Wall Street.

The Fed’s deliberations and apparent lack of urgent concern about inflation was perhaps a welcome sign as investors grappled with new evidence of increases in consumer prices as well as rising oil.

Higher prices would make it harder for policymakers to justify further rate cuts.

The Fed lowered key interest rates by a half-point to 3 percent on Jan. 30, following an emergency three-quarter point cut the prior week.

“The Fed identified that the consumer is in somewhat tough straits,” said John O’Donoghue, co-head of equities at Cowen & Co. And while the rate cuts made last month in response to the tight credit markets came as a relief at the time, “the credit markets are still very stressed out, if not shut,” O’Donoghue said.

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