Stocks gain on price reading

NEW YORK (CNNMoney.com) -- A key government reading on consumer prices sent futures higher Tuesday morning after the report suggested a somewhat stable view of inflation.

Stock futures, which had fallen earlier following results from the nation's two largest retailers, Home Depot and Wal-Mart, rose after the government's inflation measure, which looks at prices at the retail level, came below economists' forecasts.

The Consumer Price Index rose 0.4 percent in April on a continued rise in energy and food prices, according to the Labor Department. Economists surveyed by Briefing.com forecast that the CPI would rise 0.5 percent in the April, slower than the 0.6 percent increase in March.

The core rate, which excludes volatile food and energy prices, advanced 0.2 percent in April, directly in line with expectations.

In earnings news, Wal-Mart (Charts, Fortune 500), the world's largest retailer, posted earnings that were in line with Wall Street's expectations. But the retailer said that results should have been better and it warned that second-quarter results would come in at or below forecasts. Shares edged downward in premarket trade.

Home Depot (Charts, Fortune 500), the No. 1 home improvement retailer, reported that the slump in home building cut its earnings to 53 cents a share, well below the forecast of 59 cents and down from the 70 cents it earned a year earlier. Shares fell more than 2 percent in premarket activity.

Tech bellwether Applied Materials (Charts, Fortune 500), which makes equipment used by computer chipmakers, is forecast to report results after the bell Tuesday, with analysts looking for a narrow gain in earnings.

Monday after the bell HSBC USA, a unit of British bank HSBC Holdings (Charts), reported that profit fell 11 percent in the first quarter as it took a hit from the downturn in the subprime mortgage sector. The bank was one of the first to signal problems in the sector when it set aside $10.6 billion at the end of last year to cover bad loans, due primarily to its portfolio of U.S. home loans.

In merger news, Canadian publisher Thomson Corp. (Charts) agreed to buy wire service Reuters (Charts) for $17.2 billion, a move that would create the world's largest financial news and data company. Shares of Reuters climbed 3.8 percent in premarket Nasdaq trade.

Markets in Asia closed lower across the board, after a drop in Japanese machinery orders and rising concerns about the U.S. economy. Major indexes in Europe were also lower in early trading.

Oil prices were down in early trading. U.S. light crude fell 20 cents to $62.26 a barrel in electronic trading.

Treasury prices were lower, taking the yield on the 10-year note to 4.70 percent from the 4.69 percent level reached late Monday. The dollar was slightly higher against the euro and the yen in early trading.