Stocks up again on inflation report
Wall Street scored a fifth straight gain and the Dow Jones industrials achieved their third straight record close Thursday after the Labor Department said falling gas prices helped push inflation down last month. Oil prices that plunged to their lowest level in a year added to the advance.
The inflation report, and the prospect of a further decline as oil prices dropped, bolstered the notion that the economy could slow enough to allow the Federal Reserve to eventually lower interest rates.
Though stocks moved higher overall, advancing issues outnumbered decliners by a margin of only 6 to 5 on the New York Stock Exchange, suggesting some investors are concerned the market could be overbought. Nonetheless, investors took their cues from the inflation news and indications that a flurry of private equity buyouts would continue, with deals announced for Clear Channel Communications Inc. and Reader’s Digest Association Inc.
Ethan Harris, chief U.S. economist at Lehman Brothers Holdings Inc., contends that while the overall economy could show strains, stocks are poised to continue rising because of the strength of profits and balance sheets at corporations.
The Dow rose 54.11, or 0.44 percent, to 12,305.82. The Dow has closed at record levels 17 times since the start of October and again set a new trading high of 12,325.91 Thursday, passing 12,300 for the first time.
Broader stock indicators also managed gains. The Standard & Poor’s 500 index rose 3.19, or 0.23 percent, to 1,399.76, and the Nasdaq composite index gained 6.31, or 0.26 percent, to 2,449.06. The S&P is at a six-year high, while the Nasdaq is near a six-year high.
Financials and the consumer discretionary sectors led the advancers Thursday, while energy stocks moved lower as commodity prices fell. Light, sweet crude settled down $2.50 at $56.26 on the New York Mercantile Exchange as traders focused on the drop in demand a slowing economy could bring rather than production cuts, which could support prices.
Bonds fell sharply, with the yield on the benchmark 10-year Treasury note rising to 4.67 percent from 4.62 percent late Wednesday. The dollar was mixed against other major currencies, while gold prices fell.
In economic news, the 0.5 percent drop in the Consumer Price Index, the key measure of inflation, matched the decline in September and marked the first two-month drop since late last year. The core inflation figure, which strips out volatility-prone prices for food and energy, rose 0.1 percent, the smallest increase in eight months.
The Russell 2000 index of smaller companies was down 1.21, or 0.15 percent, at 790.75.
At the New York Stock Exchange, consolidated volume came to 2.83 billion shares compared with 2.93 billion traded Wednesday.
Overseas, Japan’s Nikkei stock average closed down 0.49 percent. Britain’s FTSE 100 closed up 0.40 percent, Germany’s DAX index was up 0.19 percent, and France’s CAC-40 was down 0.11 percent.