Print

Email story

Comment

Email editor

Stocks rise with decrease in fears over inflation

Despite climbing nearly $2 a barrel, crude futures failed to rally a selloff, a sign that oil's inflationary effects may hold little concern.

NEW YORK - Investors cheered by long-awaited good news on inflation pushed stocks higher Tuesday, hoping that a lower-than-expected increase in basic wholesale prices meant the economy will stay on a sound footing. Solid first-quarter earnings also fueled buying.

"We're finally seeing some numbers that point to less inflation in the pipeline," said Lincoln Anderson, chief investment officer at LPL Financial Services in Boston. "Coupled with a pretty strong earnings outlook for the quarter, this hopefully puts a floor on the market and gets things turned around again. The fundamentals of the economy remain good."

The Dow Jones industrial average rose 56.16, or 0.56 percent, to 10,127.41, coming off of four-straight down sessions and a loss of 436 points.

Broader stock indicators also gained ground. The Standard & Poor's 500 index was up 6.80, or 0.59 percent, at 1,152.78, and the Nasdaq composite index gained 19.44, or 1.02 percent, to 1,932.36.

Worries about U.S. oil refining capacity pushed crude futures sharply higher, keeping stock gains somewhat in check. A barrel of light crude settled at $52.29, up $1.92, on the New York Mercantile Exchange.

The lack of a major selloff as crude futures climbed nearly $2 per barrel showed that Wall Street may no longer be concerned about the inflationary effects of oil. And analysts said the Producer Price Index report may be showing a clear end to the market's inflation worries - as long as today's Consumer Price Index, measuring retail prices, comes in better than expected.

"I believe oil is disinflationary, just because when you spend more on gasoline, you spend less on other things," said John Lynch, chief market analyst at Evergreen Investments. "More importantly, wage growth is moderate, so demand is kept in check. And with demand low, you can't raise prices or trigger inflation. I think we're seeing that in the PPI."

The bond market surged after the PPI report, with the yield on the 10-year Treasury note falling to 4.20 percent from 4.27 percent late Monday. The dollar fell against most major currencies, while gold prices were higher.

Advancing issues outnumbered decliners by about 5 to 2 on the New York Stock Exchange, where preliminary consolidated volume came to 2.15-billion shares, compared with 2.18-billion traded Monday.

The Russell 2000 index of smaller companies was up 9.61, or 1.64 percent, at 594.94.

International markets recovered somewhat after Monday's sharp losses, triggered by last week's Wall Street selloff.

Japan's Nikkei stock average rose 1.16 percent, while in Europe, Britain's FTSE 100 closed up 0.27 percent, Germany's DAX index gained 0.06 percent, and France's CAC-40 climbed 0.32 percent for the session.

[Last modified April 20, 2005, 02:56:36]