Bulls make it two in a row

NEW YORK (CNNMoney.com) -- Stocks surged Thursday for the second session in a row, as a tame reading on inflation and a mild day in the Treasury market helped investors set aside recent worries about rising interest rates.

The Dow Jones industrial average (up 71.37 to 13,553.72, Charts) and the broader S&P 500 index (up 7.30 to 1,522.97, Charts) both gained around 0.5 percent. The tech-fueled Nasdaq composite (up 17.10 to 2,599.41, Charts) climbed nearly 0.7 percent.

Oil prices spiked 2 percent. The price of gold and other metals rose, too. Treasury prices inched higher, raising the corresponding yields. The dollar gained versus other major currencies.

Stock gains were broad based, with 23 out of 30 Dow stocks rising, led by Alcoa (up $0.68 to $41.16, Charts, Fortune 500), General Motors (up $1.50 to $33.60, Charts, Fortune 500), Intel (up $0.54 to $23.21, Charts, Fortune 500) and Exxon Mobil (up $1.42 to $84.77, Charts, Fortune 500).

The Dow climbed more than 180 points Wednesday, helped by a handful of upbeat economic readings and some relief on the interest rate front.

The momentum extended to Thursday, with investors welcoming mild signs of "core" inflation in the Producer Price Index (PPI), ahead of the more closely watched Consumer Price Index (CPI), due out on Friday.

Worries about higher inflation, rising Treasury yields and ultimately the Federal Reserve raising interest rates this year prompted an investor sell-off last week.

But the PPI helped quell soothe some worries Thursday, as the "core" reading, which strips out volatile food and energy prices, rose just 0.2 percent in May, in line with forecasts.

The overall reading of inflation at the wholesale level exceeded estimates, climbing 0.9 percent.

Thursday's "core" reading leaves the year-over-year rate in a range that is assumed to be acceptable to Fed policy-makers.

"The report was pretty benign, so people who have been worrying about inflation have another month of being wrong," said Lincoln Anderson, chief economist and chief investment officer at LPL Financial Services.

Friday brings the CPI, which is expected to have risen 0.6 percent overall and 0.2 percent at the core.

Anderson said he thought the CPI would be pretty similar in that it was not likely to show a big feed-through of the rise in energy prices into the core reading, which would be a positive for stocks. However, any deviation from the 0.2 percent level could upset the stock and bond markets.

Reports on industrial production and capacity utilization, as well as consumer sentiment, are also due on Friday.

Markets got some support from the run-up in energy and metal prices, which lifted the underlying stocks.

U.S. light crude oil for July delivery climbed $1.39 to settle at $67.65 a barrel on the New York Mercantile Exchange. Gold prices added $3.20 to settle at $655.90 an ounce.

"Oil and metals stocks are really leading the market," said Maira Thompson, a senior portfolio manager for Clark Capital Management. "The slowdown that a lot of people anticipated hasn't appeared yet."

The Amex Oil index added 2 percent, and the Amex Natural Gas index climbed 1.8 percent, while the Amex Gold Bugs index rose 1.5 percent.

On the corporate front, Bear Stearns (up $0.11 to $149.60, Charts, Fortune 500) reported lower quarterly earnings that missed estimates as a result of lower bond trading revenue and a write-down. Shares ended little changed.

Fellow investment bank Goldman Sachs (Charts, Fortune 500) reported higher quarterly earnings that topped estimates, thanks to investment banking fees and stock trading. But the stock fell more than 3 percent as investors took a 'sell the news' approach.

Colgate-Palmolive (down $0.61 to $66.85, Charts, Fortune 500) warned Thursday that fake toothpaste under the Colgate brand that may contain a poisonous chemical has been found in four states.

In deal news, the Chicago Mercantile Exchange (down $3.76 to $547.49, Charts) sweetened its $10 billion offer for CBOT Holdings (up $3.31 to $204.81, Charts), the owner of the country's oldest futures exchange, by adding a special dividend.

Market breadth was positive. On the New York Stock Exchange, winners beat losers by almost 2 to 1 on volume of 1.45 billion shares. On the Nasdaq, advancers topped decliners by 3 to 2 on volume of 1.97 billion shares.

In addition to the PPI, investors digested a report that showed mortgage rates made the biggest jump in nearly four years last week, sending the 30-year fixed rate to its highest level since July 2006.

Treasury prices held steady following the PPI reading, moving slightly lower in afternoon trade, putting the yield on the benchmark 10-year note at 5.22 percent, up slightly from late Wednesday. Treasury prices and yields move in opposite directions.

In currency trading, the dollar hit a four-and-a-half-year high against the yen and edged higher versus the euro.