Retail gains, oil drop push stocks higher
NEW YORK » Stocks climbed yesterday as strong April retail sales and a steep drop in oil prices alleviated investors' worries about a greater-than-forecast jump in labor costs.
The day's headlines brightened the economic picture, with retailers reporting their best monthly sales in two years as consumers spent freely despite the recent spike in gasoline prices. Wall Street also welcomed upbeat earnings fromTyco International Ltd.
While the Labor Department said U.S. worker productivity rebounded in the first quarter, a sharp rise in wage costs stoked concerns about inflation as the market continued speculating the potential for more interest rate hikes from the Federal Reserve.
But William Hummer, chief economist forWayne Hummer Investments, said he was not surprised by the higher labor costs given the brisk pace of economic growth, noting that the annualized wage inflation rate of 1.4 percent was relatively tame.
"The economy is resilient, more than most thought, and I think that could very well continue into the second half," Hummer said. "Headwinds of interest rates and energy costs will diminish the momentum somewhat, but not in a major way."
The Dow Jones industrial average gained 38.58, or 0.34 percent, to 11,438.86, its best close since reaching 11,489.59 on Jan. 19, 2000. The Dow is 284 points, or 2.4 percent, from an all-time high of 11,722.98 from early January 2000.
Broader stock indicators advanced. The Standard & Poor's 500 index rose 4.40, or 0.34 percent, to 1,312.25, and the Nasdaq composite index surged 19.93, or 0.87 percent, to 2,323.90.
Bonds recovered earlier losses and stayed flat, with the yield on the 10-year Treasury note unchanged at 5.15 percent from late Wednesday. The stabilizing bond market eased investors' inflation and interest rate jitters and helped the major indexes close in on multiyear highs, said Steven Goldman, chief market strategist forWeeden & Co.
The market faces its next test today, when the Labor Department reports data on monthly job growth and wages. Non-farm payrolls are expected to decrease by 11,000 to 200,000 for April, while average hourly earnings are seen growing 0.3 percent.
Traders sold off crude futures for a third straight day after government data on Wednesday showed a rebound in gasoline supplies ahead of the summer driving season. A barrel of light crude lost $2.34 to settle at $69.94 on the New York Mercantile Exchange, where gasoline sank 9.1 cents to $1.995 a gallon.