Wall Street rises as data point to stable rates
NEW YORK -- Wall Street extended its gains today after a pair of economic reports pointed to the Federal Reserve keeping interest rates stable when it meets later this month. The Dow Jones industrials rose more than 100 points and Treasury prices rose after the reports.
The Labor Department's report on May core inflation, which measures price increases but strips out volatile food and energy costs, met investor expectations. Meanwhile, the Reuters/University of Michigan preliminary reading on consumer sentiment for June has fallen to 56.7 from 59.8 last month. The market had expected the reading would remain unchanged.
Taken together the reports seem to make the case for the Fed to keep rates unchanged, rather than raising them, when it meets June 24-25. The Fed has shown an increasing concern about the impact of more expensive commodities such as oil on the economy.
The so-called core inflation reading, which excludes items like oil, gas and food because of their volatility, appeared to ease some investor concerns about the effect of rising prices on consumer spending, and in turn, the economy as a whole. While overall inflation showed its biggest one-month gain since November, the fact that the run-up seems largely contained to food and energy appeared to give investors some solace.
The Labor Department's Consumer Price Index grew 0.6 percent last month, which was just above the 0.5 percent economists had expected. The core inflation reading edged up a more moderate 0.2 percent. That raised investor hopes that consumer spending -- which accounts for more than two-thirds of the U.S. economy -- won't be hurt as much as the market has feared by record oil and gasoline prices.
In midmorning trading, the Dow rose 121.31, or 1.00 percent, to 12,262.89.
Broader stock indicators also rose. The Standard & Poor's 500 index rose 16.72, or 1.25 percent, to 1,356.59, and the Nasdaq composite index rose 46.22, or 1.92 percent, to 2,450.57.
Bond investors fear inflation because it lowers the value of fixed-income securities, so short-term Treasurys, the most vulnerable to the effects of rising prices, moved higher. The 2-year yield was fell to 2.95 percent from 3.05 percent late Thursday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, dipped to 4.19 percent from 4.22 percent.
The dollar rose against other major currencies, while gold prices rose.
