Tame Inflation Data Brings Out the Bulls on Wall Street

U.S. stocks rose Friday, rebounding from their steepest fall in two months, on reassuring inflation news that may give the Federal Reserve room to lower interest rates.

The Dow Jones industrial average was up 111.09 points, or 0.84 percent, at 13,326.22. The Standard & Poor's 500 Index was up 14.38 points, or 0.96 percent, at 1,505.85. The Nasdaq Composite Index was up 28.17 points, or 1.11 percent, at 2,561.91.

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Shares of rate-sensitive financial services stocks — such as Goldman Sachs Group Inc. (GS), Morgan Stanley and Merrill Lynch & Co. (MER) — were among the session's top gainers. Energy stocks also led the way higher as oil futures rose.

Higher energy costs pushed U.S. producer prices up 0.7 percent in April, but excluding volatile food and energy prices, the rate was unchanged from March.

The PPI data eased inflation concerns two days after the Federal Reserve decided to hold rates steady, citing the potential for inflation to rise.

"The PPI number and the fact that there is always hope that maybe toward the end of the year the Fed will lower interest rates, has helped propel the market higher today," said Warren Simpson, managing director at Stephens Capital Management in Little Rock, Arkansas. "We had a good sell-off yesterday, but there's a lot of people who want in this market."

For the week, the Dow rose 0.46 percent, the S&P edged up 0.02 percent and the Nasdaq fell 0.38 percent.

Gains were supported with deal news led by the Chicago Mercantile Exchange Holdings raising its takeover offer for the company that controls the Chicago Board of Trade.

CME shares were up 7.94 percent to $537.50. CBOT Holdings was up 3.7 percent to $201.24.

Shares of subprime mortgage lender NovaStar Financial Inc. rose after the company said the subprime market is recovering. Executives said the environment for providers of home loans to people with poor credit histories appeared to have bottomed in March.

NovaStar stock rose 8.2 percent to end at $7.00.

As earnings seasons draws to a close, chip maker Nvidia's results beat estimates after the bell on Thursday, sending its shares up 7.1 percent to $35.14. It was one of the top gainers on the Nasdaq.

Retail stocks were the biggest drag on all three indexes after U.S. retail sales unexpectedly tumbled in April, and soaring gasoline prices and a slumping housing market tempered consumer spending.

Stocks had slumped Thursday after disappointing monthly sales figures from chain retailers and a wider-than-expected U.S. trade deficit fanned fears about the economy's strength.

A separate report on March business inventories showed the inventory-to-sales ratio that gauges how long it would take to sell off stocks at the current sales pace dropped to 1.27 months' worth from 1.29 in February.

Shares of Exxon Mobil Corp. were the top-weighted gainer on the S&P, up 1.8 percent to $81.18 on the NYSE, while rival ConocoPhillips advanced 1.6 percent to $70.19.

The S&P index of financial companies and banks rose 0.9 percent. Goldman shares were up 1.97 percent to $227.50, Merrill rose 2.74 percent to $93.51 and Morgan Stanley shares were up 0.91 percent at $85.15.

Trading was light on the NYSE, with about 1.41 billion shares changing hands, below last year's estimated daily average of 1.84 billion, while on the Nasdaq, about 1.7 billion shares traded, below last year's daily average of 2.02 billion.

Advancing stocks outnumbered declining ones by a ratio of about 4 to 1 on the NYSE and by 2 to 1 on Nasdaq.

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