Tame Inflation Spurs Stock Rally

The Dow Jones industrial average chugged Thursday to its third record high this week, benefiting from an apparent contradiction: tame inflation and soaring energy prices.

The Dow rose 76.19 to 6,625.67, beating Tuesday’s record of 6,600.66, as interest rates sank in the bond market amid news that wholesale prices rose only modestly in December despite the recent stream of robust economic data.

Broader market measures flirted with new highs, but most came up slightly short. The Russell 2000 list of smaller companies, which has lagged the blue-chip sector’s rebound from last summer’s steep sell-off, edged to its first record high since May 22.

But in sharp contrast to the day’s enthusiasm for continued mild inflation, the Dow’s advance was led by oil-related shares, which were held back Wednesday even as energy prices continued to rise.

“When you look at all the inflation components, there has not been a meaningful trend of increase in any except energy,” said Robert Streed, senior investment adviser at Northern Trust in Chicago.

Advancing issues outnumbered decliners by a 12-to-7 margin on the New York Stock Exchange, where volume was heavy at 554.12 million shares as of 4 p.m., almost even with Wednesday’s hectic pace.

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

NYSE

Seagate Technology, up 1-3/8 at 45.

The Scotts Valley, Calif.-based data technology concern reported better than expected earnings for its second quarter ended Dec. 27.

Sears, Roebuck, up 1-1/4 at 46-1/2.

Kmart, up 3/8 at 10-7/8.

Limited, down 7/8 at 16-7/8.

Neiman Marcus Group, down 3-3/8 at 23-3/8.

Storeowners reported divergent results for the key holiday shopping season, with strong sales at many upscale retailers and discounters outpacing those at some departmentstore and apparel chains.

Borders Group, up 2-1/8 at 36-7/8.

The book retailer said it expects to exceed forecasts for last year thanks to a strong holiday season. Borders, based in Ann Arbor, Mich., said sales at stores open at least a year rose 11.3 percent during the quarter ended Jan. 5.

NASDAQ

Chiron, up 3/8 at 19-7/8.

The FDA approved their application to begin human testing of a gene therapy to fight AIDS.

Xicor, down 2 at 8-1/8.

The maker of programmable semiconductors expects its fourth-quarter earnings to be well below estimates due to a 16 percent drop in sales.