Upswing in stocks
muted by gas prices

NEW YORK » Stocks edged higher yesterday on plunging oil prices and an upbeat outlook from Hewlett-Packard Co.

But inflation concerns capped the day's rise, as government data showed wholesale prices for July increased by the largest amount in nine months thanks to higher gas prices.

The Dow Jones industrial average rose 37.26, or 0.35 percent, to 10,550.71.

Broader stock indicators also rose. The Standard & Poor's 500 index rose 0.90, or 0.07 percent, to 1,220.24, and the Nasdaq composite index rose 8.09, or 0.38 percent, to 2,145.15.

Bond prices fell sharply, with the yield on the 10-year Treasury note rising to 4.27 percent from 4.21 percent late Tuesday.

Wall Street has been looking warily for signs that higher energy costs are accelerating inflation, which could curb consumer spending, raise business costs and spark more interest rate hikes by the Federal Reserve.

Yesterday, the Labor Department reported that its Producer Price Index, which measures price pressures before they reach the consumer, jumped by 1 percent in July, the biggest advance since a 1.5 percent increase last October. Rising "impact costs," including the costs of raw materials and energy, are affecting companies' earnings, said Jeanne L. Mockard, a senior portfolio manager at Putnam Investments.

But the slide in oil prices, which dropped 6 percent from Friday's peak, still cheered investors enough to send stocks higher. A barrel of light crude settled at $63.25, down $2.83, on the New York Mercantile Exchange.

The Labor Department reported yesterday that the core rate of inflation, excluding energy and food, rose by a worrisome 0.4 percent in July, the biggest increase since January. Investors are leery about rising energy prices, especially after Wal-Mart Stores Inc. said Tuesday its customers were spending less because gasoline was costing them more.

The inflation number took forecasters by surprise, said Rod Smyth, chief investment strategist at Wachovia Securities. "I think the settled reaction of markets is not to get too worried about it and I think, broadly, that is right. If you look at the bond market, bond yields are up slightly, but there has not been a violent reaction."

The government reported Monday that the average nationwide price for gasoline rose to $2.55 per gallon in its latest survey, up 18 cents per gallon in just one week. And yesterday, the Department of Energy said in the past four weeks, gasoline demand has averaged nearly 9.5 million barrels a day, 1.5 percent above year-ago levels.