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Stocks rise, but capped by inflation

Thu., Aug. 18, 2005, midnight

NEW YORK – Stocks edged higher Wednesday on plunging oil prices and an upbeat outlook from Hewlett-Packard Co.

But inflation concerns capped the day’s rise, as government data showed wholesale prices for July increased by the largest amount in nine months thanks to higher gas prices.

The Dow Jones industrial average rose 37.26, or 0.35 percent, to 10,550.71.

Broader stock indicators also rose. The Standard & Poor’s 500 index rose 0.90, or 0.07 percent, to 1,220.24, and the Nasdaq composite index rose 8.09, or 0.38 percent, to 2,145.15.

Bond prices fell sharply, with the yield on the 10-year Treasury note rising to 4.27 percent from 4.21 percent late Tuesday.

Wall Street has been looking warily for signs that higher energy costs are accelerating inflation, which could curb consumer spending, raise business costs and spark more interest rate hikes by the Federal Reserve.

On Wednesday, the Labor Department reported that its Producer Price Index, which measures price pressures before they reach the consumer, jumped by 1 percent in July, the biggest advance since a 1.5 percent increase last October. Rising “impact costs,” including the costs of raw materials and energy, are affecting companies’ earnings, said Jeanne L. Mockard, a senior portfolio manager at Putnam Investments.

But the slide in oil prices, which dropped 6 percent from Friday’s peak, still cheered investors enough to send stocks higher. A barrel of light crude settled at $63.25, down $2.83, on the New York Mercantile Exchange.

The dollar was up against the euro. Gold prices fell.

The Labor Department reported Wednesday that the core rate of inflation, excluding energy and food, rose by a worrisome 0.4 percent in July, the biggest increase since January. Investors are leery about rising energy prices, especially after Wal-Mart Stores Inc. said Tuesday its customers were spending less because gasoline was costing them more.

The Russell 2000 index of smaller companies rose 0.21, or 0.03 percent, to 654.82.

Overseas, Japan’s Nikkei stock average fell 0.35 percent. Britain’s FTSE 100 closed down 0.56 percent, Germany’s DAX index was down 0.25 percent, and France’s CAC-40 was down 0.11 percent.


 

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