Good news lures back buyers
Stocks regained ground Wednesday as the market’s cautious optimism was restored by government data showing only modest inflation, better-than-expected corporate earnings, announcements of two merger deals and the report of a third.
The Dow Jones industrial average rose 62.59, or 0.59 percent, to 10,673.79, following a 174-point slide Tuesday. Analysts said a reflex rally was to be expected after the previous session, which most thought had been oversold.
The broader gauges were also higher. The Standard & Poor’s 500 index gained 6.64, or 0.56 percent, to 1,190.80. The Nasdaq composite index was up 0.93, or 0.05 percent, at 2,031.25.
“Judging by conversations with our clients, people were looking to re-engage,” said Brian G. Belski, market strategist at Piper Jaffray. “If we’d had a stronger semblance of inflation, this thing could’ve really come uncoupled today.”
The Labor Department reported a tiny 0.1 percent rise in its Consumer Price Index for January, as energy costs slid for a second straight month. The data, which suggests consumer inflation remains very much under control, was at odds with Friday’s reading of the Producer Price Index, which showed higher inflation for wholesale goods. While the discrepancy was puzzling to some, it provided a needed lift for stocks.
“We’ll just call this ‘better than yesterday,’ ” said Arthur Hogan, chief market analyst at Jefferies & Co. in Boston. “Last week we got the surprise in the PPI and we didn’t get the corresponding surprise in the CPI, which means the raw material costs are not being passed on to the end user with the finished goods, so that’s good news on the inflation front. That makes us less worried the Federal Reserve will need to step up its rate tightening.”
Treasuries rallied on the inflation data, sending the yield on the 10-year note to 4.26 percent, down from 4.29 percent late Tuesday. The newly released minutes of the Fed’s Open Market Committee’s policy meeting, held earlier this month, inspired buying.
The dollar, which tumbled Tuesday on rumors that South Korea planned to diversify its currency holdings away from the greenback, recovered somewhat after Seoul’s central bank denied the report.
Advancers outnumbered declining issues by about 2 to 1 on the New York Stock Exchange.
The Russell 2000 index, which tracks smaller company stocks, was up 2.61, or 0.42 percent, at 620.54.
Overseas, Japan’s Nikkei stock average shed 0.84 percent. In Europe, France’s CAC-40 lost 0.63 percent, Britain’s FTSE 100 slid 0.88 percent and Germany’s DAX index dipped 0.29 percent.