Stocks Get Another Lift

The Dow and Nasdaq jump after a positive report on inflation.
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Updated from 4:14 p.m. EDT

Stocks closed higher again Friday as investors cheered positive inflationary data, and Wall Street heads in to the weekend with three straight days of gains.

The

Dow Jones Industrial Average

was up 85.76 points, or 0.6%, to 13,639.48, as 25 of its 30 components were positive, led by a 4.4% surge in

Intel

(INTC) - Get Report

.

The

S&P 500

climbed 9.94 points, or 0.7%, to 1532.91, and the

Nasdaq Composite

rose 27.30 points, or 1.1%, to 2626.71.

All told, the Dow added 1.6% this week and the S&P 1.7%. The Nasdaq was the best performer, increasing 2%.

Giving stocks a boost was a benign report on consumer-level inflation. The Labor Department's consumer price index climbed 0.7% for May, slightly ahead of expectations. However, the core index, which excludes food and energy prices, was below estimates with a 0.1% rise.

The closely monitored core inflation figure is now up 2.2% over the past 12 months, down from 2.3% in April.

The data follow Thursday's producer price index, which rose a greater-than-expected 0.9% in May. The core PPI rose 0.2%, as expected. The PPI report measures inflation at the wholesale level.

The CPI is considered the more important of the two when it comes to influencing

Federal Reserve

decisions on interest rates, but both are factored into the central bank's planning.

"The core

CPI number is something the market is comfortable with, despite the fact that the headline number remained strong," said Michael Sheldon, chief market strategist with Spencer Clarke LLC. "First-quarter data were fairly weak, but there's a clear trend of improvement. Second-quarter growth is likely to be more positive than previously thought."

For the past few sessions, the bond market hasn't been nearly as punishing as it was last week and early this week, and that helped stocks regain their footing. Around 4 p.m. EDT, the 10-year Treasury was up 17/32 in price, yielding 5.15%, and the 30-year bond was higher by 25/32, yielding 5.25%.

"The interest rate picture is still driving equity markets, and that's likely to continue," said Sheldon. "The rise in interest rates has taken investors by surprise because of the strength in the move and how quickly rates rose. Investors had previously expected multiple rate cuts, but that theory is now changing. The Fed may be out of the picture for the rest of 2007 or may even raise rates."

Elsewhere on the economic docket, the New York Fed said its Empire State Manufacturing Index rose to a reading of 25.8 in June, compared with 8.0 in May. The index was expected to jump to 12.0.

Economic headlines were not free of disappointment, though. Industrial production was unchanged in May, below the 0.2% forecast. Capacity utilization fell to 81.3% from 81.5%, also missing estimates. The University of Michigan said its consumer sentiment index fell to a reading of 83.7 in May from 88.3 the previous month, short of the target of 87.8.

Meanwhile, new speculation about dealmaking was giving investors a chance to think about something besides interest rates. According to

Bloomberg

,

Nymex Holdings

(NMX)

might seek a sale to

NYSE Euronext

(NYX)

, Deutsche Boerse or

Chicago Mercantile Exchange

(CME) - Get Report

.

The report cited people who were close to the matter and said Nymex could be valued at $14.3 billion.

Additionally, the same news service said

Home Depot

(HD) - Get Report

is poised to get offers worth around $10 billion for its contractor-supplies division from separate private-equity groups.

The Wall Street Journal

reported that

Google

(GOOG) - Get Report

is planning an R&D center in Shanghai for later this month as it bids to take on

Baidu.com

(BIDU) - Get Report

, the search market leader in China.

Away from stocks, oil prices reversed early weakness to reach a high of $68.30 for the day. Crude oil closed with a gain of 35 cents at $68 a barrel. Precious metals also rebounded to finish higher. Gold was up $2.80 at $658.70 an ounce, and silver tacked on 9.5 cents at $13.26 an ounce.

Overseas, stocks were uniformly stronger. Tokyo's Nikkei was up 0.7%, and Hong Kong's Hang Seng also climbed 0.7%. The FTSE in London added 1.2%, and the Frankfurt DAX climbed 2.3%.