NEW YORK – A combination of moderate inflation and falling oil prices energized Wall Street Wednesday, sending stocks higher as investors grew optimistic about an end to the Federal Reserve's interest rate hikes.
The core rate of inflation, which excludes energy and food, rose by a tame 0.2 percent in January, in line with economists' forecasts. Higher prices for gasoline and electricity sent the broader Consumer Price Index up 0.7 percent last month, a greater increase than economists expected and the largest rise in prices in four months.
The Fed, under new Chairman Ben Bernanke, is keeping a close watch on inflation. If higher energy costs or any other factors cause inflation to spike, the Fed will continue its streak of short-term rate hikes in an attempt to keep price increases under control.
"There were no ticking time bombs in the inflation report," said Stuart Schweitzer, global markets strategist at JP Morgan Asset and Wealth Management. "Although there was a substantial rise in energy prices, otherwise inflation remains very contained."
Investors were heartened by a drop in crude oil futures, which sagged despite recent attacks on oil pipelines and oil workers by militants in Nigeria. A barrel of light crude was quoted at $61.30, down $1.44, in trading on the New York Mercantile Exchange.
According to preliminary calculations, the Dow Jones industrial average rose 68.11, or 0.62 percent, to 11,137.17. Sharp gains in a handful of its 30 component stocks powered the Dow ahead of broader indexes.
Broader stock indicators also advanced. The Standard & Poor's 500 index rose 9.63, or 0.75 percent, to 1,292.67, and the Nasdaq composite index rose 20.21, or 0.89 percent, to 2,283.17.
Bonds rose, with the yield on the 10-year Treasury note falling to 4.53 percent from 4.57 percent late Tuesday. The U.S. dollar was higher against most other major currencies. Gold prices were little changed.
The market has been swinging in recent weeks with each new scrap of data that might influence the Fed as it considers future interest rate hikes. Many analysts expect the choppy trading to continue.
"Overall, the market is, to some degree, held hostage by what the Fed is going to say," said John O'Donoghue, co-head of equities at Cowen & Co.
The Dow climbed as a handful of its components rose sharply, including Altria Group Inc., which rose $1.18 to $73.38 after the company backed its 2006 profit outlook Tuesday. Boeing gained $1.34 to $74.39 after it landed the first big deal at Asia's biggest air show and Pfizer rose 55 cents to $26.19 after the Food and Drug Administration approved its treatment for a common blood infection.
Sprint Nextel Corp. fell $1.13 to $23.80 after the wireless phone company reported a 55 percent drop in fourth-quarter net income on heavy expenses. Looking ahead, the company forecast 2006 revenue totaling $41 billion or more, with high single-digit to low double-digit growth in its wireless business, and a mid-to-high single-digit revenue decline for long distance. The revenue figure was below analysts' expectations.
Casino operator Harrah's Entertainment Inc. rose 36 cents to $72.72 after it posted a hefty fourth-quarter loss, hurt mostly by hurricane-related expenses and costs from writing off a property it plans to sell. Without items and charges, its earnings per share beat analysts' estimates.
Dow Jones & Co., publisher of The Wall Street Journal, rose 47 cents to $38.42 after it announced a reorganized structure that will combine the print and online editions of The Wall Street Journal into one unit. The shake up follows an announcement in January that the company's CEO, Peter Kann, and the Journal's publisher, Karen Elliott House, would step down. Dow's shares have languished recently, trading approximately where they were a decade ago, having run up as high as the $70's during the dot-com boom.
U.S. shares of Baidu.com Inc. rose $3.04 to $54.73 a day after the Chinese-language search engine reported better-than-expected fourth-quarter results. After Tuesday's closing bell, Baidu.com said it posted a profit of 9 cents per share, topping Wall Street estimates by 2 cents. Revenue was up 29 percent from the year-earlier period.
Advancing issues led decliners by more than 2 to 1 on the New York Stock Exchange where volume was 1.62 billion shares, up from 1.55 billion at the same time Tuesday.
The Russell 2000 index of smaller companies rose 6.75, or 0.93 percent, to 733.53.
Overseas, Japan's Nikkei stock average fell 0.71 percent. Britain's FTSE 100 gained 0.25 percent, Germany's DAX index rose 1.05 percent, and France's CAC-40 rose 1 percent.