The plunge in the share prices of commodity producers -- gold, base metals and oil -- during the past few days could help diminish worries over inflation and, if the slide in raw material prices continues, it may alleviate cost pressures on the manufacturing sector.

Even with many raw material prices at record levels, the passing on of those higher costs by producers to consumers has been minimal except for the rising energy costs, economists said.

"It looked like a financial engineering supercycle by hedge and commodity funds," said Clément Gignac, chief economist and strategist at National Bank Financial Inc. The commodity cycle has been the strongest in five decades, he said.

U.S. producer price inflation figures, which are scheduled for release today, are forecast to have increased by 0.2 per cent during April when food and energy are excluded, compared with a 0.1-per-cent increase in March, according to a survey of economists by Bloomberg. Growth in producer prices on a year-over-year basis is forecast to have remained unchanged from March at 1.7 per cent.

However, the inflation picture looks worse when energy is included. Producer prices including food and energy are forecast to have increased 0.8 per cent during April, compared with 0.5 per cent in March. Producer prices on a year-over-year basis are forecast to have increased 3.8 per cent in April, compared with a 3.5-per-cent rate in March, according to the Bloomberg survey.

Investors should focus on less volatile groups such as insurance, consumer staples, health care, utilities and large-capitalization companies, Mr. Gignac said.

"I think people have gotten a little bit used to the fact of volatility in the commodity-related sectors," said Kate Warne, Canadian market strategist for Edward Jones & Co. That pipelines and financial stocks are doing better suggests investors remain confident about the underlying strength of the economy, she said.

In the United States, the Federal Reserve Board has expressed concerns that the economy may be too hot. The capacity utilization data due out today are estimated to have increased to 81.5 per cent in April, compared with 81.3 per cent in March.

Investors will also be looking for signs today that the increase in mortgage rates is cooling down new housing starts and building permits data for April.

The housing starts data has tended to trigger the biggest changes in the Dow Jones industrial average over the past two years, according to Merrill Lynch & Co. Inc. Housing starts declined 7.8 per cent and 7.9 per cent during March and February, respectively, it said.

Companies scheduled to report quarterly earnings today are Deere & Co., Hewlett-Packard Co., Home Depot Inc., Staples Inc. and Wal-Mart Stores Inc.

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