Dow logs best 2-day advance since July
NEW YORK » Wall Street surged again yesterday, launching the Dow Jones industrial average to its best two-day advance since last July after data showed that wholesale inflation, excluding energy and food costs, is rising at a gentle pace.
The market was unfazed by the U.S. Labor Department's headline producer price index, which rose 0.9 percent in May due to surging gasoline prices -- a bigger increase than in April and higher than economists predicted. Investors instead were pleased that the core PPI, which strips out often-volatile food and energy costs, posted a small 0.2 percent rise, as expected, after a flat reading in April.
If core inflation is under control, the Federal Reserve is unlikely to lift interest rates, a possibility that started dogging the market last week, when the yield on the benchmark 10-year Treasury note passed 5 percent for the first time since last summer.
The 10-year yield edged up yesterday to 5.23 percent from 5.21 percent late Wednesday, but stayed well below the peak of 5.295 percent reached Tuesday. The market's initial dismay over rising bond yields and the diminishing chance of a rate cut seems to have abated; with Treasury yields appearing stable, the market is more at ease with the idea that the Fed probably won't lower rates this year, said Jay Suskind, head trader at Ryan Beck & Co.
"Now perhaps the glass is being seen as half-full," Suskind said. "If the reason for higher interest rates is growth, well, at the end of the day, that's what grows corporate earnings."
The consumer price index, an inflation gauge that is even more closely watched by the Fed than the PPI, will be released today.
The Dow rose 71.37, or 0.53 percent, to 13,553.72. The Dow has risen 258 points over the past two sessions, logging its largest two-day point gain since July 18-19.
The blue chip index is still 122 points below the record close it hit on June 4, but it is up 287 points from 13,266.73 -- the trough it tumbled to on June 7, after rising yields started spooking investors.
Broader stock indicators also rose yesterday. The Standard & Poor's 500 index advanced 7.30, or 0.48 percent, to 1,522.97, and the Nasdaq composite index climbed 17.10, or 0.66 percent, to 2,599.41.
The Russell 2000 index of smaller companies climbed 4.58, or 0.55 percent, to 837.12.
Advancing issues outnumbered decliners by nearly 2 to 1 on the New York Stock Exchange, where consolidated volume came to 2.80 billion shares, down from 3.02 billion Wednesday.
The dollar rose against other major currencies, and gold prices also climbed.
Crude oil prices jumped $1.39 to $67.65 a barrel on the New York Mercantile Exchange, buoying oil company stocks.
Meanwhile, investment bank Goldman Sachs Group Inc. said second-quarter earnings rose on investment banking revenue, but a slowdown in its mortgage business capped profits. The stock dipped $7.89, or 3.4 percent, to $225.75.
Bear Stearns Cos. reported weaker-than-expected second-quarter earnings, also citing mortgage lending troubles. The stock rose 11 cents to $149.60.