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Spokane, Washington  Est. May 19, 1883

Subdued Inflation Fuels Stock Market Rally

Associated Press

Another mild reading on inflation reinforced optimism on Wall Street, sending interest rates lower Tuesday and boosting many leading stock indicators further into record territory.

The Dow Jones industrial average rose 42.11 points to to 5,624.71, breaking above the 5,600 mark for the first time in four weeks as the blue-chip sector continued to show renewed vigor.

The Dow is now about 65 points shy of its all-time high, having rebounded about 280 points, or more than 5 percent, since last week, when it slid below 5,350 on worries about inflation and increasingly competitive bond yields.

The broader market also rose. Major indexes padded Monday’s records in brisk trading after bonds rallied on two reports suggesting than earlier signs of rising consumer spending power have not translated into higher inflation.

The Labor Department reported that the core rate of consumer inflation, which excludes the volatile energy and food segments, rose only 0.1 percent in April, the smallest increase this year. Separately, the Commerce Department reported that retail sales fell by 0.3 percent in April, the first setback in five months.

“Those two numbers added a degree of comfort that wasn’t there before,” said Thom Brown, market strategist, Rutherford, Brown & Catherwood in Philadelphia.

Some of the stocks that moved substantially or traded heavily Tuesday:

NYSE

Caremark International, up 3/4 at 29-1/2.

MedPartners-Mullikin, down 1-1/8 at 25.

The companies announced an agreement for MedPartners-Mullikin to acquire Caremark in a $2.5 billion stock swap that will combine the nation’s two largest managers of doctor practices.

Corning, up 2-3/4 at 37-7/8.

The company said it will spin off its clinical laboratories and pharmaceutical services businesses to shareholders, deciding not to sell the struggling lab division to another company.

Du Pont, up 3 at 82-3/4.

Phillips Petroleum, up 1/2 at 39-1/2.

The companies announced they are talking about combining the U.S. refining, marketing and transportation operations of Phillips and Du Pont’s Conoco division.

Wal-Mart Stores, up 1/2 at 24-3/4.

The company reported that its earnings rose slightly in the first quarter, helped by strongerthan-expected profits from its Supercenter grocery and dry goods stores.

NASDAQ

ValuJet, up 1-5/16 at 15.

PaineWebber reportedly raised its investment rating on the stock, which slid almost 25 percent Monday in reaction to Saturday’s fatal crash of a ValuJet DC-9. The brokerage said that the shares are cheap following the large sell-off.