Stocks resume rising
after China comments

NEW YORK » Stocks vaulted higher for a second straight session yesterday as investors welcomed the Treasury Department's move to put pressure on the Chinese currency system and, perhaps, eventually reduce the U.S. trade deficit.

Investors reacted decisively after the Bush administration declared yesterday afternoon that China may be using its monetary policies to unfairly affect trade. The Dow jumped 70 points higher in just 23 minutes, finishing with a two-day gain of 191, and the Nasdaq composite index climbed past the 2,000 mark for the first time in more than a month.

The market began the day lower after the Labor Department's Producer Price Index showed higher-than-expected increases in wholesale prices. With the counterpart Consumer Price index due before Wednesday's session, analysts warned that Wall Street's late rally could be short-lived.

"It's encouraging to see these kind of gains two days in a row, and I guess I'm cautiously optimistic," said Neil Massa, an equity trader at John Hancock Funds. "But all this can be erased tomorrow with one number."

The Nasdaq gained 9.72, or 0.49 percent, to 2,004.15, its best close since April 12.

Other indicators also moved sharply higher. The Dow rose 79.59, or 0.78 percent, to 10,331.88, after rising 112.17 on Monday. And the Standard & Poor's 500 index was up 8.11, or 0.7 percent, at 1,173.80.

The bond market advanced, with the yield on the 10-year Treasury note falling to 4.12 percent from 4.13 percent late Monday. The dollar lost ground against other major currencies after big gains in the past few sessions, and gold prices rose.

Crude oil futures closed moderately higher, though the Treasury's stance on China helped Wall Street shrug off the increase. A barrel of light crude settled at $48.97, up 36 cents, on the New York Mercantile Exchange.

China's yuan currency is pegged to the dollar in international trading, which has made China far more competitive than the United States due to its lower labor and materials costs. While not outright accusing China of currency manipulation, the Treasury Department said it may do so in the future unless the Chinese government switches to a flexible exchange system.

The Treasury Department's announcement reversed a modestly down session on Wall Street. Investors' inflation fears were renewed after the Labor Department's Producer Price Index, which measures wholesale prices, rose 0.6 percent in May, more than the 0.4 percent economists expected.