Stock Market Rallies on Encouraging News
Wall Street ended the week with a solid advance Friday as some investors hunted for bargains after two weeks of mostly falling share prices.
The market was bolstered by a tame report on so-called core inflation in September and by relief that a report on last month’s retail sales wasn’t worse.
Also, crude oil slipped amid indications of weak U.S. gasoline demand and reports that more Gulf Coast refineries were coming back on line after being shuttered because of hurricanes Katrina and Rita. Near-term crude futures in New York ended at $62.63 a barrel, down 45 cents.
But the news failed to encourage the bond market. Longer-term Treasury yields edged up to fresh six-month highs.
The Dow Jones industrial average rose 70.75 points, or 0.7%, to 10,287.34.
Winners topped losers by 2 to 1 on the New York Stock Exchange and on Nasdaq.
After weeks of warnings by Federal Reserve officials about the threat of inflation because of high energy prices, investors were braced for the government’s report on the consumer price index for September.
The index was up 1.2%, but core inflation -- prices for things other than food and energy -- rose a less-than-expected 0.1%.
That helped bring buyers back to stocks, analysts said.
The report “takes some pressure off of inflation fears, and that’s what the market has been obsessed about the last few weeks,” said Michael Sheldon, strategist at Spencer Clarke.
Through Thursday, the Dow had fallen 4.4% since Sept. 12.
Other indexes, particularly those of smaller stocks, had fared worse. The Russell 2,000 small-stock index dropped 8.5% from Sept. 12 through Thursday.
Investors jumped back into that segment of the market Friday. The Russell index gained 9.87 points, or 1.6%, to 633.15.
The blue-chip Standard & Poor’s 500 index rose 9.73 points, or 0.8%, to 1,186.57. The Nasdaq composite was up 17.61 points, or 0.9%, to 2,064.83.
For the week, however, the Dow eased 0.1%, the S&P; was off 0.8% and Nasdaq fell 1.2%.
A strong third-quarter earnings report Friday from General Electric helped boost sentiment. Next week will bring a barrage of profit reports, and market bulls are hoping for upbeat numbers from many companies.
The bond market remains a big question market for stocks, however. Yields continued to move higher Friday despite the core inflation news.
The 10-year Treasury note rose as high as 4.53% and ended at 4.48%, up from 4.46% Thursday and the highest since April 7.
Bond investors fear that energy price inflation “will feed through into core inflation” in coming months, said David Ging, an interest rate strategist at Credit Suisse First Boston in New York. That could assure that the Federal Reserve continues to push up short-term rates, putting more pressure on long-term rates, he said.
In other market highlights:
* The government’s report of a 0.2% rise in retail sales in September was a relief to investors who worried that consumers would cut back spending more severely as energy prices rose. Among retailers, Target rose $1.14 to $53.49 and Best Buy gained $1.53 to $43.29.
* Healthcare stocks rallied after UnitedHealth Group reported a 21% rise in quarterly profit. UnitedHealth surged $2.23 to $56.43, WellPoint rose $2.44 to $73.58 and Cigna gained $1.99 to $111.59.
* Vintage Petroleum shot up $10.35 to $48.94 after Occidental Petroleum on Thursday agreed to buy the firm. Occidental fell $2.25 to $72.73.
