Retail sales, economic data boost stocks

Stocks climbed Thursday as strong April retail sales and a steep drop in oil prices alleviated investors’ worries about a greater-than-forecast jump in labor costs.

The day’s headlines helped brighten the economic picture, with retailers reporting their best monthly sales in two years as consumers spent freely despite the recent spike in gasoline prices. Wall Street also welcomed upbeat earnings from Tyco International Ltd.

While the Labor Department said U.S. worker productivity rebounded in the first quarter, a sharp rise in wage costs stoked concerns about inflation as the market continued speculating the potential for more interest rate hikes from the Federal Reserve.

But William Hummer, chief economist for Wayne Hummer Investments, said he was not surprised by the higher labor costs given the pace of economic growth, and noted that the annualized wage inflation rate of 1.4 percent was relatively tame.

“The economy is resilient, more than most thought, and I think that could very well continue into the second half,” he said. “Headwinds of interest rates and energy costs will diminish the momentum somewhat, but not in a major way.”

The Dow Jones industrial average gained 38.58, or 0.34 percent, to 11,438.86, its best close since reaching 11,489.59 on Jan. 19, 2000.

Broader stock indicators advanced. The Standard & Poor’s 500 index rose 4.40, or 0.34 percent, to 1,312.25, and the Nasdaq composite index surged 19.93, or 0.87 percent, to 2,323.90.

Bonds recovered earlier losses and stayed flat, with the yield on the 10-year Treasury note unchanged at 5.15 percent from late Wednesday. The stabilizing bond market eased investors’ inflation and interest rate jitters and helped the major indexes close in on multiyear highs, said Steven Goldman, chief market strategist for Weeden & Co.

“We still have a great deal of momentum,” Goldman said. “Stocks should continue to edge higher with modest setbacks along the way.”

Traders sold off crude futures for a third straight day after government data on Wednesday showed a rebound in gasoline supplies ahead of the summer driving season. A barrel of light crude lost $2.34 to settle at $69.94 on the New York Mercantile Exchange, where gasoline sank 9.1 cents to $1.995 a gallon.

Advancing issues led decliners by 5 to 3 on the New York Stock Exchange, where volume of 1.75 billion shares matched the 1.75 billion shares changing hands at the same point Wednesday.

The Russell 2000 index of smaller companies rose 6.99, or 0.91 percent, to 774.72.

Japan’s stock markets were closed for the rest of the week for national holidays. Britain’s FTSE 100 rose 0.45 percent, Germany’s DAX index climbed 1.18 percent and France’s CAC-40 was higher by 0.77 percent.