Dow posts 2nd straight record close

NEW YORK (CNNMoney.com) -- The Dow Jones industrial average closed at a record high for the second session in a row Friday, at the end of a strong week on Wall Street, thanks to a mild read on consumer prices that furthered bets that inflation is easing

The Dow (up 28.76 to 12,445.52, Charts) gained 0.2 percent ending at a record high for the 20th time since October. The blue-chip barometer also hit a record trading high earlier in the session.

The broader S&P 500 (up 1.60 to 1,427.09, Charts) index ended less than two points higher and closed at a fresh six-year high. The tech-fueled Nasdaq (up 3.35 to 2,457.20, Charts) composite also gained a few points and ended within 9 points of its 2006 high, hit in November.

For the week, the Dow gained 1.1 percent, the S&P gained 1.2 percent and the Nasdaq gained 0.8 percent.

Treasury prices ended little changed after rising in the morning. Oil prices rose and gold prices fell.

Stocks rose more decidedly in the morning, following the release of the CPI report. However, gains dwindled in the afternoon as the bond market lost steam and the impact of the quarterly options expiration took effect, said Barry Hyman, equity strategist at EKN Financial Services.

Stocks rallied this week thanks to a spate of economic news that has supported hopes that growth is slowing at a moderate pace, and that inflationary pressures are waning.

Friday's Consumer Price Index (CPI) supported the second of those hopes.

In general, "the scenario for the market couldn't be any better," Hyman said.

He said that after five months of gains, the long-called for correction may finally happen early next year, but he thinks it will be short-lived.

"Unless the economy starts to show dramatically slower growth, even slower than in the third quarter, there's good reason to remain optimistic longer term," he added.

Next week brings reports on the housing market, producer prices, durable goods orders, personal income and spending and that report's inflation component.

A few market-moving earnings are also due, with Oracle (Charts), Circuit City (Charts) and Morgan Stanley (Charts) among the standouts.

Both overall consumer prices and core prices - which strip out food and energy - were unchanged in November, the government reported Friday. Wall Street economists thought both would rise 0.2 percent.

The report seemed to lend support to comments from the Federal Reserve that the slowing economy should take the edge off pricing pressure.

With core CPI now "behaving well" for two months in a row, the inflation picture may actually be a little better than had been thought, said Stephen Stanley, chief economist at RBS Greenwich Capital.

While that's a positive development, it doesn't mean that the Federal Reserve is any more likely to cut interest rates early next year, he said, citing the stronger economic reports that have been released in the last two weeks.

"Two weeks ago, the data were weak, but the recent reports have been more positive," Stanley said. "If the economy is holding up, the Fed's not going to ease just because inflation is a bit better."

Other morning reports also supported the "soft landing" versus recession argument, including industrial production, which showed a surprise rise of 0.2 percent in November, versus economists' bets for an unchanged reading. Capacity utilization held steady, missing forecasts for a slight rise.

Among stock movers, Adobe Systems (up $2.00 to $42.81, Charts) rallied nearly 5 percent after the software maker reported higher quarterly earnings and revenue late Thursday.

A number of other large technology shares advanced, including Intel (up $0.19 to $20.96, Charts), eBay (up $0.32 to $32.92, Charts) and Amazon.com (up $0.99 to $40.01, Charts).

Dow gainers included Honeywell (up $0.93 to $43.62, Charts), General Electric (up $1.15 to $37.36, Charts), Verizon Communications (up $0.39 to $36.48, Charts) and Citigroup (up $0.96 to $54.07, Charts).

Dell (down $0.34 to $26.53, Charts) said after the close Thursday that it will delay filing its third-quarter financial report because of ongoing investigations into its finances. Dell stock lost over 1 percent Friday.

Black & Decker (down $8.66 to $78.26, Charts) slumped after warning that fourth quarter and fiscal year 2006 earnings won't meet estimates, due to weak U.S. sales. Illinois Tool Works (down $1.12 to $46.80, Charts) issued a similar dour outlook.

A decline in gold and silver prices dragged on the underlying stocks, with the Amex Gold Bugs (down $5.00 to $339.35, Charts) index and the iShares Silver Trust (down $9.02 to $128.15, Charts) both declining.

Market breadth was negative. On the New York Stock Exchange, losers edged winners eight to seven on volume of 2.10 billion shares. On the Nasdaq, decliners barely edged out advancers on volume of 2.37 billion shares.

Volume was heavy Friday because of the "quadruple witching," a quarterly event in which stock futures and options and stock index futures and options all expire at the same time.

U.S. light crude oil for January delivery gained 92 cents to settle at $63.43 a barrel on the New York Mercantile Exchange. Oil prices rallied in the previous session after OPEC said it would cut production by 500,000 barrels a day starting Feb. 1.

Treasury prices were barely higher, giving back bigger morning gains. The modest advance lowered the yield on the benchmark 10-year note to 4.59 percent from 4.60 percent late Thursday. Bond prices and yields move in opposite directions.

In currency trading, the dollar gained against the yen and euro.

COMEX gold fell $11.80 to settle at $619.10 an ounce.

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