Stocks Climb as Retailers Gain

Blue chips rose on Tuesday as a jump in quarterly profit from electronics chain Best Buy boosted retailer stocks and offset an unexpected decline in retail sales.

The Dow Jones industrial average (search) closed up 25.01 points, or 0.24 percent, at 10,547.57. The Standard & Poor's 500 Index (search) ended the session up 3.09 points, or 0.26 percent, at 1,203.91. The technology-laced Nasdaq Composite Index (search) ended flat, up a mere 0.07 of a point, or unchanged on a percentage basis, at 2,069.03.

"The retailers got a boost from Best Buy," said Robert Drust, managing director of listed trading at investment bank Wedbush Morgan in Los Angeles. "It seemed like the news from Best Buy overshadowed the retail sales number."

Best Buy (BBY), the No. 1 U.S. electronics chain, shot up 14.7 percent to $67.80 after it reported the huge jump in profit on strong sales of MP3 music players, digital TVs and video games. arm, and health-care concessions from its leading labor union, could yield about $9 per share of value for GM shareholders.

Wal-Mart Stores Inc. (WMT) climbed 2.9 percent to $49.68, lifting the Dow and the S&P, while Home Depot Inc. (HD) climbed 0.7 percent to $40.03, and Target Corp. (TGT) rose 2.3 percent to $54.55.

The market was pleased by a 0.6 percent drop in the Producer Price Index (search), the Labor Department's (search ) measure of wholesale price inflation. Economists had forecast an 0.2 percent decrease.

The economic data implies "that the Federal Reserve may continue to raise short-term interest rates at a measured pace, but they may pause periodically," said Hugh Johnson, chief investment officer at Johnson Illington Advisors. "That's good news for the economy, for earnings and stock prices."

But investors were disappointed as May's retail sales data, reported by the Commerce Department, fell 0.5 percent, more than the 0.2 percent analysts expected.

Crude oil futures fell modestly after reaching a seven-week high Monday, but prices remained about $55 per barrel as investors awaited pricing and production news from OPEC from its regular meeting and from the U.S. inventory report, both coming Wednesday. A barrel of light crude settled at $55, down 62 cents, on the New York Mercantile Exchange (search).

While crude oil prices remain unusually high, the Producer Price Index showed that higher gasoline prices were not feeding inflation — fears of which weighed heavily on the markets earlier in the year. However, with retail sales declining, investors worried that the high energy costs were instead eating into consumers' disposable income.

Bonds sold off as stocks rose, with the yield on the 10-year Treasury note rising to 4.11 percent from 4.09 percent late Monday. The dollar was mixed against other major currencies, and gold prices fell.

Despite difficult market conditions that have led many Wall Street firms to issue warnings about their second-quarter earnings, Lehman Brothers (LEH) said its quarterly earnings rose 12 percent on the strength of its investment banking and fixed-income trading. Lehman, which beat Wall Street profit estimates by 4 cents per share, climbed 3.2 percent, or $3, to $96.05.

Dow industrial General Motors (GM) gained $1.42 to $35.87 after the Detroit News reported that the struggling automaker was seeking benefit concessions from auto workers. Rival Ford Motor Co. added 30 cents to $10.82 as it announced a spinoff and public stock offering of its Hertz Corp. auto rental subsidiary.

Drug maker Mylan Laboratories Inc. (MYL) announced a $1.25 billion stock buyback, worth up to 25 percent of the company's outstanding stock. The company also increased its 2006 and 2007 profit forecasts. Mylan climbed $1.88 to $19.58.

Weighing on the Dow and the S&P 500 was Altria Group Inc. (MO), which fell 2 percent, or $1.37, to $66.95 as a ruling on the appeal of a $10.1 billion verdict against the company was not on this week's court schedule, raising the likelihood it might not be seen until the fall.

Investors await the ruling by the Illinois Supreme Court on Altria's appeal of the case in which its Philip Morris USA unit was found to have fooled smokers into thinking "light" cigarettes were healthier than regular smokes.

Stock trading was moderate, with 1.32 billion shares changing hands on the New York Stock Exchange, below the 1.46 billion daily average for last year. About 1.44 billion shares were traded on Nasdaq, below the 1.81 billion daily average last year. Advancers outnumbered decliners on the New York Stock Exchange by about 7 to 4 and by 3 to 2 on Nasdaq.

The Russell 2000 index of smaller companies was up 5.37, or 0.8 percent, at 634.39.

Overseas, Japan's Nikkei stock average rose 0.22 percent. In Europe, Britain's FTSE 100 was down 0.07 percent, France's CAC-40 dropped 0.14 percent, and Germany's DAX index lost 0.16 percent in late trading.

Reuters and the Associated Press contributed to this report.