- The Washington Times - Wednesday, November 17, 2004

NEW YORK (AP) — Stocks bounded higher yesterday as investors shrugged off a fresh indicator of rising inflation and welcomed an $11 billion deal that combines retailers Kmart Holding Corp. and Sears, Roebuck and Co. Climbing oil prices kept a lid on gains, however, in light of a potential heating-oil supply crunch.

The merger — the largest such transaction involving U.S. retailers — strong data on industrial production and a jump in housing construction overshadowed a worrisome reading of the Consumer Price Index, the government’s most closely watched inflation barometer. The latest inflation data followed a sharp 1.7 percent increase in the Producer Price Index, which sent stocks falling Tuesday.

The Dow Jones Industrial Average finished up 61.92, or 0.59 percent, at 10,549.57, after surging more than 100 points earlier in the day.

The broader gauges were also higher, although they, too, lost some of their earlier momentum. The Standard & Poor’s 500 Index rose 6.51, or 0.55 percent, to 1,181.94. The Nasdaq Composite Index was up 21.06, or 1.01 percent, at 2,099.68 — it’s best showing since Jan. 27.

Rising costs for energy and food sent the Consumer Price Index up 0.6 percent in October, the biggest advance in five months. Analysts said the Labor Department’s latest snapshot of the inflation climate makes it more likely that the Federal Reserve Board will raise interest rates when policy-makers next meet, on Dec. 14.

Excluding volatile energy and food prices, “core” inflation increased by a more modest 0.2 percent in October. Both readings were higher than economists had forecast.

Separately, industrial production shot up 0.7 percent, a reading that suggests the sector is gaining momentum. Home builders showed strength after the Commerce Department reported a 6.4 percent jump in housing construction last month.

Oil futures traded higher after the U.S. government’s weekly report on fuel inventories. Crude inventories rose for an eighth straight week, up 800,000 barrels, but the supply of distillate fuels, which include heating oil and diesel, fell by 1 million barrels. Traders had been hoping for a build in distillate inventories ahead of the winter heating season. Light, sweet crude for December delivery settled 73 cents higher at $46.84 per barrel on the New York Mercantile Exchange. Heating oil futures surged 8.45 cents, or 6 percent, to $1.41 per gallon.

Adding to crude’s volatility: In Russia, embattled oil giant OAO Yukos said Moscow’s all-out assault to collect back taxes could force it to halt its daily output of more than 2 million barrels; in Nigeria, the world’s No. 7 exporter, rebels vying for the oil-rich Niger Delta stopped handing over their weapons to a government-appointed disarmament commission claiming the process was not transparent; and in Iraq, saboteurs attacked a well near northern Kirkuk.

Discount chain operator Kmart soared $7.78, or 7.7 percent, to $109, on its plan to merge with Sears, a deal that will create the nation’s third-largest retailer.

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