Stocks Rise on Tame Core Inflation Data

Wall Street ended the week with a sturdy advance Friday as mild inflation data and improving retail sales created a brighter economic picture and strong quarterly earnings at General Electric Co. (GE) bolstered the gains. Nonetheless, the major indexes finished lower for the week.

According to preliminary calculations, the Dow Jones industrial average (search) gained 70.75, or 0.69 percent, to 10,287.34. Broader stock indicators also finished higher. The Standard & Poor's 500 index (search) added 9.73, or 0.83 percent, to 1,186.57, and the Nasdaq composite index (search) rose 17.61, or 0.86 percent, to 2,064.83.

Stocks rose after the Labor Department said its core consumer price index (search) grew just 0.1 percent in September, a sign that higher prices have so far been limited to the volatile energy sector. Accounting for energy and food, which are excluded from core inflation, the CPI jumped 1.2 percent.

Investors also welcomed a turnaround in September retail sales that signaled consumers are still spending despite fears of a slumping economy. The market slipped after the University of Michigan said its consumer sentiment index declined for the fourth straight month, but regained its footing soon afterward.

Michael Strauss, chief economist at Commonfund, said that while the core CPI escaped the impact of soaring oil prices last month, that effect should soon work its way into prices elsewhere.

"The market probably did a reasonably good job anticipating this pickup in inflation," Strauss said. "Investors are relieved there wasn't more pressure on core inflation. Unfortunately, we're probably going to see that pressure in the upcoming months."

Bonds continued their recent decline, with the yield on the 10-year Treasury note climbing to 4.49 percent from 4.47 percent on Thursday. The dollar was mixed against most major currencies, while gold prices inched upward.

Friday's gains helped cushion another uneasy week on Wall Street as a spate of profit warnings renewed concerns that rising oil prices would whittle down corporate earnings. While some of those fears came undone on solid results from GE and aluminum producer Alcoa Inc., investors remained reserved ahead of next week, when third-quarter earnings reports will start to cascade in.

For the week, the Dow lost 0.05 percent, the S&P 500 slid 0.78 percent and the Nasdaq dropped 1.22 percent.

"I think this market now is basically trying to stabilize," said Peter Cardillo, senior vice president and market analyst at S.W. Bach & Co. "Since the market's already discounted higher interest rates, higher inflation and murky fourth-quarter guidance, I think today's action is part of that stabilization.

"Going forward, the market will probably begin to focus on economic activity rebounding in the first quarter," he said.

The Commerce Department (search) said Friday that retail sales grew 0.2 percent in September after declining 1.9 percent the month before. But setting aside auto sales, which slumped after incentives boosted summertime demand, retail sales jumped 1.1 percent, compared with economists' prediction of 0.8 percent.

However, Friday's mostly positive economic data were muddled by a weaker reading of consumer confidence. Michigan's consumer sentiment index for October fell to 75.4 from 76.9 — below economists' target of 80 — as consumers braced for more impact from the recent storms.

Crude oil dipped amid indications of weak U.S. gasoline demand and reports that more Gulf Coast refineries are coming back on line after being shuttered because of hurricanes Katrina and Rita. A barrel of light crude slid 45 cents to $62.63 on the New York Mercantile Exchange.

GE said its quarterly profit grew 15 percent despite losses from the hurricanes, as earnings expanded at a double-digit rate across all of its businesses. Revenue was 9 percent higher while orders increased 11 percent, the company said. GE shares rose 32 cents to $34.34.

UnitedHealth Group Inc. (UNH), one of the nation's biggest health insurers, posted a 21 percent jump in quarterly earnings and topped Wall Street estimates by a penny, citing improvements in each of its business segments. UnitedHealth added $2.22 to $56.42.

Medical device maker Boston Scientific Corp. (BSX) fell 44 cents to $23.86 after reporting a $269 million third-quarter loss largely caused by a massive $600 million legal settlement, but also tied to falling sales of its heart stents. Even without one-time items, Boston Scientific's earnings missed Wall Street targets by 2 cents per share.

Commodities broker Refco Inc. (RFX) faced more pressure after the company said it is closing down its broker-dealer unit. On Thursday, Refco temporarily shut Refco Securities LLC because of a cash shortage, but the company insisted the unit was mostly unaffected by an accounting scandal involving Chief Executive Phillip R. Bennett. Refco shares were trading at $7.90 Thursday before being halted by the New York Stock Exchange.

Advancing issues outpaced decliners by 11 to 5 on the NYSE, where volume of 1.7 billion shares fell behind the 1.82 billion shares traded on Thursday.

The Russell 2000 index of smaller companies gained 9.87, or 1.58 percent, to 633.15.

Overseas, Japan's Nikkei stock average dropped 0.21 percent. Britain's FTSE 100 rose 0.19 percent, Germany's DAX index gained 0.51 percent, and France's CAC-40 was higher by 0.27 percent.