Inflation news helps stocks advance
NEW YORK – Wall Street advanced Wednesday after a better-than-expected report on consumer prices tempered some of the market’s concerns about inflation.
The Labor Department’s report that consumer prices advanced 0.2 percent in April after rising 0.3 percent in March seemed to alleviate investors’ worries that the recent surge in energy costs would force prices throughout the economy to spike higher. The moderation in prices comes despite the largest jump in food prices in 18 years.
Wall Street has been concerned that higher food and energy costs are cutting into consumers’ ability to spend. Any pullback is an unnerving prospect for investors because consumer spending accounts for more than two-thirds of U.S. economic activity.
Marc Pado, U.S. market strategist for Cantor Fitzgerald, said the tame consumer prices reading, along with recent figures on productivity, indicate that businesses are swallowing some of the rising costs they face and not passing all of them on to consumers.
“You have higher input costs but you’re getting more out of your workers so therefore you’re able to control your output costs,” he said. “The economy is lean and mean and doing well even though on the demand side it’s slumping.”
The Dow rose 66.20, or 0.51 percent, to 12,898.38. A late sell-off in technology stocks caused the market to pare its gains, with the blue chip index at times up more than 150 points.
Broader stock indicators also advanced. The Standard & Poor’s 500 index rose 5.62, or 0.40 percent, to 1,408.66. The Nasdaq composite index rose 1.58, or 0.06 percent, to 2,496.70.
Though Wednesday’s data was comforting and major indexes are approaching their highs of the month, that doesn’t mean Wall Street has conquered its problems and is set for a rebound from months of turmoil. Analysts warn that examining stocks by sector shows that one in particular is still being left behind: financials.
Overseas, Japan’s Nikkei stock average rose 1.18 percent. In afternoon trading, Britain’s FTSE 100 rose 0.07 percent, Germany’s DAX index rose 0.33 percent, and France’s CAC-40 advanced 1.13 percent.