NEW YORK – U.S. stocks rallied Wednesday with the S&P 500 reaching a three-month high as investors interpreted a tame increase in core consumer prices to mean the Federal Reserve will keep interest rates unchanged in the short term.
The Dow Jones industrial average jumped 96.86 points, or 0.86 percent, to end at 11,327.12, while the Standard & Poor's 500 Index advanced 9.85 points, or 0.77 percent, to finish at 1,295.43. The Nasdaq Composite Index climbed 34.53 points, or 1.63 percent, to close at 2,149.54.
Falling U.S. crude oil futures further underpinned rising stocks as declining energy prices can reduce a major expense for Corporate America, potentially helping profit margins.
Shares of interest-rate-sensitive industrial concerns such as heavy equipment maker Caterpillar Inc. (CAT), aircraft manufacturer Boeing Co. (BA) and General Electric Co. (GE) were among the Dow's top gainers. Investors snapped up beaten-down tech shares and drove them sharply higher.
"People are paying attention to the PPI and CPI reports, which gives the Fed reason to keep interest rates on hold," said Anthony Conroy, head trader at BNY Brokerage, a unit of Bank of New York.
The core Consumer Price Index, excluding volatile food and energy prices, rose moderately in July and followed an unexpected drop in July core producer prices Tuesday that had sparked a sharp rally in stocks.
The Nasdaq had its two best days of trading in three years, rising 3.89 percent.
After the bell, Hewlett-Packard Co. (HPQ) shares jumped 5 percent to $36.15 said quarterly profit surged from a year earlier when it had a tax charge. The computer and printer maker also announced a $6 billion share buyback, in conjunction with its latest earnings.
During the regular session, HP shares rose 1.3 percent, or 44 cents, to close at $34.43 on the New York Stock Exchange.
U.S. crude oil futures fell 1.6 percent, or $1.16, to settle at $71.89 a barrel on Wednesday amid profit-taking after government data showed crude oil inventories declined in line with market expectations.
"Once (oil) was down 1 percent for the day, you start to pay attention as it pops up on people's screens," Conroy said.
GE, whose businesses range from making appliances to owning a majority stake in media and entertainment company NBC Universal, also was the biggest positive influence on the S&P 500. GE's stock was up 1.5 percent, or 51 cents, at $33.71.
Caterpillar shares rose 2.5 percent, or $1.70, to $69.11 and Boeing shares climbed 2.9 percent, or $2.25, to $78.83.
Apparel retailers grabbed the spotlight after Abercrombie & Fitch Co. (ANF) shares shot up 14.2 percent, or $7.88, to $63.40 as the teen-oriented clothing company posted a stronger-than-expected quarterly profit while Talbots Inc. rose 10.6 percent, or $2.26, to $23.61 following news of its smaller-than-expected loss . Talbots sells clothing and accessories designed for career women.
Qualcomm Inc. (QCOM) stock gave the Nasdaq 100 its biggest lift and rose 6.7 percent, or $2.38, to $37.83 after Merrill Lynch said it had added Qualcomm to its focus list, citing its valuation, strong earnings growth and substantial cash flow generation.
Volume on the NYSE was active, with about 1.60 billion shares traded, just slightly below last year's daily average of 1.61 billion. On Nasdaq, about 2.15 billion shares traded, exceeding last year's daily average of about 1.80 billion.
Advancers outnumbered decliners on the NYSE by a ratio of more than 3 to 1, while on Nasdaq, about two stocks rose for every one that fell.