Price Report Lifts Markets; Dow Adds 3.75
The stock market rose modestly Tuesday, lifted out of a two-day slump by a smaller-than-expected gain in February consumer prices that took the edge off the market’s inflation fears. The Dow Jones average of 30 industrial stocks edged up 3.75 to 2,266.25. The blue chip barometer had jumped 14.64 points in the first half hour of trading but retreated.
Advancing issues outnumbered declines by about 9 to 5 in nationwide trading of New York Stock Exchange-listed stocks.
Big Board volume totaled 142.01 million shares, down from 151.26 million Monday.
The Dow industrials had lost nearly 80 points over the previous two sessions in a broad selloff after Friday’s report of sharply higher wholesale inflation in February. That report exacerbated investor anxieties that the Federal Reserve will be forced to raise interest rates to pinch off inflation.
But the government reported Tuesday that the consumer price index, a measure of inflation at the retail level, rose only 0.4% in February, less than the market had expected. The report, out before the start of trading, triggered the sharp advance in the Dow index during the first 30 minutes, but the gain eroded over the course of the day.
Traders said the fear of high inflation and the prospect of tighter credit have not lost their grip on the market, as evinced by Tuesday’s modest rise and thin volume.
However, an opening rally sparked by the consumer price report failed to sustain itself.
“The market has not reassembled its badly frayed nerves and will do well to hold its ground,” said Monte Gordon, research director at Dreyfus Corp.
Gordon said investors have been unnerved because several economic reports have strayed far from forecasts, including Friday’s producer prices report, which reflected a 12.6% wholesale inflation rate on an annual basis.
Gordon said that although the economy is slowing, “inflation is not moving down at the same pace.”
In London, stocks ended firm after Wall Street responded favorably to the smaller than expected rise in February U.S. consumer prices. The Financial Times 100-share index closed at 2,072.2, up 18.6.
The Tokyo Stock Exchange was closed for a national holiday.
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