Bulls Like Lower Oil

A tame report on inflation also helps lift stocks.
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Updated from 4:18 p.m. EST

A tame reading on consumer-level inflation and plunging oil prices pushed the

Dow Jones Industrial Average

further into uncharted territory Thursday, and the index closed at a new record high.

The Dow gained 54.11 points, or 0.44%, to 12,305.82, having touched an intraday high of 12,325.91 earlier in the session. The index was powered by a 2.1% gain in component

Altria

(MO) - Get Report

. The

S&P 500

was up 3.19 points, or 0.23%, at 1399.76, near a six-year high.

The

Nasdaq Composite

was restrained by losses in

Dell

(DELL) - Get Report

and

Sears Holdings

(SHLD)

but still rose 6.31 points, or 0.26%, to 2449.06.

"This continues to be a strong advance," said Ken Tower, chief market strategist with CyberTrader. "Yes, it may be losing some steam on the upside, but the trend is certainly still up."

About 2.85 billion shares changed hands on the

New York Stock Exchange

, as advancers beat decliners by a 6-to-5 margin. Volume on the Nasdaq was roughly 2.08 billion shares, and winners matched losers.

Helping the major indices was a sharp drop in oil prices, halting the previous session's upward trend. Crude futures finished down $2.50 at $56.26 a barrel.

In sector action, transportation stocks were big winners following oil's dramatic drop. Both the Nasdaq Transportation Index and the Dow Jones Transportation Average rose 1.1%. Oil stocks were among the biggest decliners, with the Philadelphia Oil Service Sector Index losing 3.7% and the Amex Oil Index falling 2.5%.

Before the opening bell, the Labor Department said its consumer price index for October was down 0.5%, compared with expectations for a decline of 0.3%. The so-called core index, which excludes food and energy prices, rose 0.1%, slightly below estimates.

Core inflation, a closely monitored figure, is now up 2.7% over the past year, down from a five-year high of 2.9% in September.

The data follow the latest reading of the producer price index, which sank 1.6% last month, the sharpest fall in five years and three times the expected decline. The core index fell 0.9%, far below forecasts of a 0.1% rise. The PPI report measures inflation at the wholesale level.

"The market continues to give us little inflationary growth," said Barry Hyman, equity market strategist with EKN Financial. "We were a little nervous at the PPI data, but the lower-than-expected CPI tells us that there is still a reason to believe that equity prices can continue higher. It's hard to find a reason to sell."

Following the report, the 10-year Treasury bond was down 9/32 to yield 4.66%. The dollar fell against the euro after the CPI data were released.

"The

Federal Reserve

has now gotten the numbers they want to confirm the fact that ending interest rate hikes was the right move," said Hyman. "It still may seem to be premature to lower rates, though. We've handled the inflationary story as it relates to energy, but there's still the potential for labor costs to start increasing."

On Wednesday, minutes from the Fed's two-day meeting last month revealed that policymakers remain willing to resume raising rates if they believe inflation is running too hot. The Fed has kept its target fed funds rate at 5.25% for the past three meetings but repeatedly said incoming economic data will determine its future direction.

Turning to the corporate side, Dell slumped 2.5% to $25.10. The PC maker said after Wednesday's close that it would delay its earnings report because of a

Securities and Exchange Commission

investigation into its accounting. The SEC is also now conducting a formal probe of the company's activities.

Meanwhile, Sears said third-quarter earnings rose to $196 million, or $1.27 a share, tripling the year-ago results. Excluding items, the retailer earned 83 cents a share, falling short of the Thomson First Call average estimate. Shares dropped $9.89, or 5.5%, to close $169.26.

Chip-equipment maker

Applied Materials

(AMAT) - Get Report

finished lower by 3.6% at $17.98 as its fiscal fourth-quarter profits missed analysts' projections. Applied posted $449 million in net income, or 30 cents a share, compared with $247 million, or 15 cents a share, in the year-ago period.

Despite the growth, earnings missed estimates by a penny. Sales of $2.54 billion were slightly below the $2.55 billion Wall Street consensus.

After the market closed, earnings were released by

Hewlett-Packard

(HPQ) - Get Report

,

Gap

(GPS) - Get Report

and

Starbucks

(SBUX) - Get Report

.

Also on the economic docket, the Fed said that industrial production rose 0.3% in October, even with economists' expectations. Capacity use rose 0.1% to a reading of 82.2, above the 82.0 consensus. Separately, the Labor Department said that initial jobless claims fell by 2,000 to 308,000 last week.

The Philadelphia Fed Index rose to 5.1 in November from -0.7 the previous month, matching economists' expectation. The report follows a very strong New York Empire State Index on Wednesday.

Overseas, European markets moved higher. London's FTSE 100 rose 0.4% to 6255, and Frankfurt's Xetra DAX added 0.2% to 6443. Asia's markets were mixed. The Nikkei dipped 0.5% at 16,164, and the Hang Seng rose 0.4% to 19,154.