Producer prices’ drop
lights fire under Dow

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Associated Press

NEW YORK >> Blue-chip stocks rose today after a government report indicated inflation appears under control, but analysts warned that the big advance doesn't mean Wall Street has suddenly become optimistic about an economic turnaround.

The Dow Jones industrial average closed up 117.69 at 10,416.25, rebounding after traders sent it down 101 points earlier in the session.

Broader stock indicators were mixed. The Standard & Poor's 500 index climbed 6.73 to 1,190.16, but the Nasdaq composite index was down 6.85 at 1,956.47.

Advancers outnumbered decliners 3 to 2 on the New York Stock Exchange, with 1,893 up, 1,173 down and 224 unchanged. Volume was 946.83 million shares vs. 1.1 billion yesterday.

The NYSE composite index rose 4.08 to 608.34, the American Stock Exchange composite index gained 4.84 to 878.41 and the Russell 2000 index was up 1.35 at 475.52.

The Treasury's 10-year note rose 12/32 to 1001/3; its yield fell 5 basis points to 4.98 percent. The 30-year bond gained 13/32 to 981/3; its yield fell 3 basis points to 5.50 percent.

Although the inflation report sets the stage for further Federal Reserve interest cuts later this year, investors still have pervasive concerns about how long it will take for an economic recovery that would help companies deliver better returns to shareholders.

Analysts cautioned that market upticks like the Dow's rise today are usually erased within days.

"I think the glaring question and ambiguity surrounding the market is when the economy is going to bottom," said Brian G. Belski, fundamental market strategist at US Bancorp Piper Jaffray. "They're not seeing a bottoming taking place yet."

Investors are locked into a mindset where buying enthusiasm is rare, and short-lived when it occurs, said William Barker, investment strategy consultant at Dain Rauscher in Dallas.

"There are a lot of cross currents in the market," he said.

The Labor Department reported producer prices fell 0.9 percent in July, the best inflation performance in eight years. Gasoline and other energy products posted big declines.

Excluding volatile energy and food prices, the "core" rate of inflation edged up by 0.2 percent in July following a tiny 0.1 percent rise, suggesting most other prices remained well-behaved.