Stocks up following inflation report
NEW YORK » Wall Street advanced yesterday after a better-than-expected report on consumer prices tempered some of the market's concerns about inflation.
The Labor Department's report that consumer prices advanced 0.2 percent in April after rising 0.3 percent in March seemed to alleviate investors' worries that the recent surge in energy costs would force prices throughout the economy to spike higher. The moderation in prices comes despite the largest jump in food prices in 18 years.
Marc Pado, U.S. market strategist for Cantor Fitzgerald, said the tame consumer prices reading, along with recent figures on productivity, indicate that businesses are swallowing some of the rising costs they face and not passing all of them to consumers.
"You have higher input costs but you're getting more out of your workers so therefore you're able to control your output costs," he said.
The Dow rose 66.20, or 0.51 percent, to 12,898.38. A late sell-off in technology stocks caused the market to pare its gains, with the blue chip index at times up more than 150 points.
Broader stock indicators also advanced. The Standard & Poor's 500 index rose 5.62, or 0.40 percent, to 1,408.66. The Nasdaq composite index rose 1.58, or 0.06 percent, to 2,496.70. The Russell 2000 index of smaller companies fell 0.78, or 0.11 percent, to 736.07.
Advancing issues outnumbered decliners by more than 3 to 2 on the New York Stock Exchange, where consolidated volume came to 3.86 billion shares, which is about even with Tuesday.
Light, sweet crude oil fell $1.58 to settle at $124.22 a barrel on the New York Mercantile Exchange.
Bond prices ticked lower as stocks advanced. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.92 percent from 3.94 percent late Tuesday.
The dollar was mixed against other major currencies, while gold prices fell.
Analysts warn that one sector of the market continues to be left behind -- financials.
Concerns that major investment banks and retail banks have more write-downs in coming quarters has put pressure on their stock prices. For instance, Lehman Brothers Holdings Inc. is down about 8.5 percent from its highs this month, while the S&P is down by only 1 percent.
"They led us into the crisis, but they're not yet leading us out of it," said Steve Goldman, chief market strategist at Weeden & Co. "That's what needs to happen."
In corporate news, Macy's Inc. reported it lost $59 million in the first quarter because of weaker sales and costs tied to combining businesses. But the results topped Wall Street's expectations and the stock rose 87 cents, or 3.6 percent, to $24.93.
Deere & Co. said its fiscal second-quarter profit rose 22 percent as higher crop prices drove global demand for its farm equipment. But the company said rising costs of raw materials could eat into its profits in the coming months. Deere fell $8.94, or 9.9 percent, to $81.25.
Jack in the Box Inc. fell $2.90, or 9.9 percent, to $24.87 after the fast food chain said sales at restaurants open at least a year fell short of forecasts for the fiscal second quarter. The company lowered its sales target for the third quarter.