Stocks eased from nearly five-year highs Thursday as traders awaited a key reading on consumer inflation. Index futures showed the S&P 500 trading 2 points below fair value, while the Nasdaq 100 was set for a 3-point decline. The 10-year Treasury bond was down 2/32 in price to yield 4.74%, while the dollar rose against the yen and euro. Blue chips staged another solid advance Wednesday, pushing the S&P 500 and Dow Jones Industrial Average to their best levels since May 2001. Optimistic commentary in the Federal Reserve's beige book report and bullish earnings news helped drive the rally. Traders trying to handicap Fed policy over the next several months will see the consumer price index Thursday. The inflation gauge is expected to show a 0.1% rise in February after jumping 0.7% in January. The core rate should rise 0.2%. Another report is expected to show that building began on an annualized 2.03 million new homes last month, down 11% from January. Atlanta Fed President Jack Guynn spoke positively on the economy late Wednesday. "I continue to think the most likely path for the economy is sustained GDP growth with inflation and inflation expectations contained within acceptable bounds," he reportedly said. "But I, like others, will be watching very carefully as events unfold." Brokerage earnings have been a bullish catalyst all week following stellar quarters at Goldman Sachs ( GS) and Lehman Brothers ( LEH). On Thursday, Bear Stearns ( BSC) is expected to say it earned $2.95 a share in the first quarter on revenue of $2.05 billion. Elsewhere Thursday, a report says Google ( GOOG) plans to launch a service that would standardize a way for traditional retailers to build an online presence. The Interned company is expected to test Google Base, a comparison shopping service that could eventually extend into real estate, the Financial Times says.
Two specialty retailers traded moderately higher late Wednesday after reporting decent quarterly earnings. Hot Topic ( HOTT) said profits fell 39% from a year ago but beat estimates by 2 cents, excluding a charge. Zumiez ( ZUMZ) posted a 59% rise in quarterly income, guided higher for 2006 and split its stock, 2-for-1. In early ratings move, Merrill upgraded Qualcomm ( QCOM) to buy from hold, J.P. Morgan cut Ford ( F) to underweight, and Kaufman initiated Broadcom ( BRCM) with a buy.