Modest inflation report helps drive stock market to second day of gains

A broad rally drove U.S. stocks solidly higher Thursday for the second day in a row, extending the market’s gains for the week.

Technology companies, which have led the market this year, contributed the most to the rally. Healthcare stocks and banks also accounted for a big slice of the market’s gains as investors sized up the latest company earnings and economic news. Crude oil prices rebounded after an early slide.

The S&P 500 index rose 25.28 points, or 0.9%, to 2,723.07. The Dow Jones industrial average climbed 196.99 points, or 0.8%, to 24,739.53. The gain turned the Dow back to positive for the year.

The Nasdaq added 65.07 points, or 0.9%, to 7,404.97.

Smaller-company stocks continued to post solid gains. The Russell 2000 index picked up 7.66 points, or 0.5%, to 1,603.71. That’s the highest close for the index since January.

“They’ve had a good couple of months,” said Tom Martin, senior portfolio manager with Globalt Investments. “The dollar really strengthened here up until the last couple of days, and that is benefiting those smaller-cap companies.”

The major indexes were moving higher from the get-go Thursday as investors sifted through the latest measure of inflation in the economy.

The Labor Department said that U.S. consumer prices rose a modest 0.2% in April, a sign that broader inflation pressure remains muted. Excluding the volatile food and energy categories, core prices ticked up just 0.1% from the previous month and 2.1% from April last year.

Slower growth in core prices may mean that the Federal Reserve will be less inclined to accelerate interest rate hikes. The Fed has signaled that it lift rates twice more this year, following an increase in March. Some expect that an uptick in inflation or economic growth might spur the Fed to add a third additional hike, for a total of four this year.

“It tells us that rates are going to continue to go higher, but maybe it starts to call into question: Are we really going to have four? Maybe three is enough,” said Bob Doll, chief equity strategist at Nuveen Asset Management.

Bond investors appeared to interpret the consumer prices data as a sign that the Fed is not likely to speed up the pace of its planned rate hikes. Bond prices rose, pulling the yield on the 10-year Treasury note down to 2.96% from 3% late Wednesday.

Technology stocks extended their gains. The sector, which is up 11.1% this year, ahead of all others.

On Thursday, Qualcomm led the sector, climbing 3.4% to $54.97 after the company’s board approved a $10-billion share buyback.

Envision Healthcare was the biggest gainer among healthcare stocks. The company added 5% to $42.74. Cardinal Health also moved higher, adding 3.8% to $54.74 after the Wall Street Journal reported that experts think the Trump administration’s plan to reduce drug prices won’t have a big effect on costs.

Traders also had their eye on corporate earnings Thursday.

CenturyLink jumped 7.5% to $19.40 after the telecom company reported earnings that were much higher than analysts expected.

Booking Holdings slid 4.7% to $2,080.02 after its latest quarterly report card disappointed traders.

L Brands slumped 7.2% to $31.68 after the retailer said it expects to only reach the low end of its first-quarter profit forecast.

Benchmark U.S. crude oil reversed an early slide. It rose 22 cents to settle at $71.36 a barrel in New York. Brent crude, used to price international oils, gained 26 cents to close at $77.47 per barrel.

The dollar fell to 109.37 yen from 109.72 yen on Wednesday. The euro strengthened to $1.1927 from $1.1861. The pound weakened to $1.3519 from $1.3555 after the Bank of England held off raising interest rates due to weaker economic growth so far this year.

Gold rose $9.30 to $1,322.30 an ounce. Silver gained 22 cents to $16.76 an ounce. Copper picked up 5 cents to $3.11 a pound.

In other energy futures trading, heating oil was little changed at $2.22 a gallon. Wholesale gasoline added 3 cents to $2.19 a gallon. Natural gas gained 8 cents to $2.81 per 1,000 cubic feet.

Major indexes in Europe finished higher Thursday. Germany’s DAX rose 0.6% and France’s CAC 40 added 0.2%. Britain’s FTSE 100 gained 0.5%.

Earlier in Asia, Japan’s benchmark Nikkei 225 rose 0.4%. South Korea’s Kospi added 0.8%. Hong Kong’s Hang Seng gained nearly 1.0%.

UPDATES:

2:25 p.m.: This article was updated with closing market prices.

This article was originally published at 8:20 a.m.