Stocks advanced Wednesday after a better-than-expected report on consumer prices tempered concerns about inflation.
The Labor Department's report that consumer prices rose 0.2% in April after rising 0.3% in March seemed to alleviate investors' worries that the recent surge in energy costs would force prices throughout the economy to race higher. The tame inflation came despite the largest jump in food prices in 18 years.
Wall Street has been concerned that higher food and energy costs are cutting into consumers' ability to spend. Any such pullback is an unnerving prospect for investors because consumer spending accounts for more than two-thirds of U.S. economic activity.
Marc Pado, U.S. market strategist for Cantor Fitzgerald, said the mild increase in the consumer price index and recent figures on labor productivity indicated that businesses were swallowing some of the rising costs they faced instead of passing all of them to consumers.
"You have higher input costs but you're getting more out of your workers so therefore you're able to control your output costs," Pado said. "The economy is lean and mean and doing well even though on the demand side it's slumping."
The Dow rose 66.20 points, or 0.5%, to 12,898.38. The blue-chip index had been up more than 150 points before a late sell-off in technology stocks.
Broader stock indicators also advanced. The Standard & Poor's 500 index climbed 5.62 points, or 0.4%, to 1,408.66. The Nasdaq composite index rose 1.58 points, or 0.1%, to 2,496.70.
The Russell 2,000 index of smaller-company stocks fell 0.78 points, or 0.1%, to 736.07.
Advancing issues outnumbered decliners by more than 3 to 2 on the New York Stock Exchange.
Government bond yields edged up as stocks advanced. The yield on the benchmark 10-year Treasury note fell to 3.91% from 3.92% late Tuesday.
Oil prices retreated. Crude futures fell $1.58 to settle at $124.22 a barrel on the New York Mercantile Exchange.
The dollar was mixed against other major currencies, while gold prices fell.
Although Wednesday's price report was comforting and major indexes are approaching their highs of the month, that doesn't mean Wall Street has conquered its problems and is set for a rebound from months of turmoil, some analysts say. They warn that an examination of the market by sector shows that one in particular -- financial stocks -- is still being left behind.
