- The Washington Times - Friday, May 11, 2007

NEW YORK (AP) — Wall Street resumed its advance yesterday as investors interpreted a government report of milder inflation as a signal that the Federal Reserve might consider cutting interest rates later this year. The Dow Jones Industrial Average soared more than 100 points, and posted its fifth straight weekly gain.

Investors were encouraged after the Labor Department’s producer price index — which measures the rate of inflation experienced by manufacturers when they purchase goods — suggested inflation is moderating. This raised hopes on Wall Street that central bankers won’t need to increase interest rates to keep the economy in check, and might even lean toward lowering them.

The stronger economic news, especially about inflation, injected a new dose of confidence that central bankers can begin to mull a rate cut. It also helped reignite a rally stopped short Thursday after retail sales reports dimmed expectations about consumer confidence.

“To some degree, the advance is in reaction to the sharp selling on Thursday,” said Richard Cripps of Stifel Nicolaus. “The market was due for a blowoff, and I think the data you got this morning don’t get in the way of the positive trend under way. A fair amount of investors want to be in the market.”

The Dow advanced 111.09, or 0.84 percent, to 13,326.22 — the biggest point rise so far this month. The index gained back most of the nearly 150 points it lost Thursday.

The Standard & Poor’s 500 Index rose 14.38, or 0.96 percent, to 1,505.85, and the Nasdaq Composite Index rose 28.48, or 1.12 percent, to 2,562.22. The Russell 2000 index of smaller companies was up 10.91, or 1.33 percent, at 829.54.

The Dow, which passed 13,300 for the first time Monday, rose 0.46 percent for the week. The S&P; 500 gained 0.02 percent for the week, and the Nasdaq fell 0.39 percent. The Russell 2000 index finished the week down 3.34, or 0.40 percent, at 829.54.

Bond prices fell, paring earlier gains after investors shrugged off the producer price index (PPI) and refocused on the rising stock market — which reduces the need for investment in safe-haven bonds. The 10-year yield rose to 4.68 percent, up from 4.64 percent late Thursday.

The dollar was mixed against other major currencies, while gold prices rose.

The Labor Department’s PPI rose to 0.7 percent in April, meeting Wall Street expectations and falling below the March reading of 1.0 percent. The core PPI, which excludes food and energy prices, was unchanged for the second month in a row.

“It looks like inflation is very tamed,” said Kim Caughey of Fort Pitt Capital Group, adding that the PPI bodes well for next week’s consumer price index and makes a rate increase appear less likely.

Crude oil futures rose 56 cents to $62.37 a barrel on the New York Mercantile Exchange. The average U.S. retail price for a gallon of gasoline yesterday was $3.042, according to AAA.

Consumer spending has been looking sluggish: the Commerce Department said retail sales unexpectedly fell in April by 0.2 percent, after rising an upwardly revised 1 percent in March. Originally, March sales were reported up 0.7 percent.

American International Group Inc. reported first-quarter profit rose 29 percent, but disclosed it would take a pretax charge from its subprime loan exposure. The world’s largest insurer rose 38 cents to $72.58.

Chicago Mercantile Exchange Holdings Inc. sweetened its offer for CBOT Holdings Inc. by more than 16 percent, hoping to head off a still-higher counteroffer from IntercontinentalExchange Holdings Inc.

Shares of the CBOT rose $7.35, or 3.8 percent, to $201.35, while the Chicago Merc added $38.35, or 7.7 percent, to $536.30. IntercontinentalExchange rose $5.70, or 4.2 percent, to $140.55.

Telecommunications equipment maker Alcatel-Lucent SA posted a loss of $10.8 million for the first quarter because of effects from the merger that formed the company. However, shares rose 57 cents, or 4.4 percent, to $13.57 after it promised a strong second half.

Advancing issues led decliners by more than 3 to 1 on the New York Stock Exchange.

The Russell 2000 index of smaller companies was up 10.91, or 1.33 percent, at 829.54.

The Russell 2000 index finished the week down 3.34, or 0.40 percent, at 829.54.

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