Dow stages late 100-point rally
Wall Street manages gains after a Fed report adds to bets that the economy is stabilizing. Tech issues remain under pressure.
NEW YORK (CNNMoney.com) -- Blue chips rallied late Wednesday, supporting the broader market, after a Federal Reserve report on the economy added to hopes that the pace of the slowdown is easing.
An unclear outlook from bellwether Intel late Tuesday kept the tech-fueled Nasdaq from posting similar gains.
The Dow Jones industrial average (INDU) gained 109 points, or 1.4%. The S&P 500 (SPX) index gained 10 points, or 1.3%. The Nasdaq composite (COMP) added 1 point, or 0.1%.
Tech shares dragged on the broad market, while consumer, housing, industrial and commodity shares kept losses in check.
Stocks roiled Monday and fell Tuesday in a choppy start to the week following a five-week run. The advance has been driven by bets that the pace of the recession is slowing. A Federal Reserve report released Wednesday afternoon added to those bets.
The Fed's "Beige Book" periodic reading on the economy showed that overall activity stayed weak or got worse. But five of the 12 districts showed a slowdown in the pace of decline and a few more districts showed certain parts of the economy were stabilizing.
"A lot of recent reports are showing that things might be flattening out and bottoming and the Beige Book seemed to indicate that too," said Stacey Shreft, director of investment strategy at The Mutual Fund Store. "That's good, but it's going to be important that the next set of data that come out reinforce it."
Despite some optimism about the economy, the speed of the stock rally has left Wall Street vulnerable to a bit of a pullback.
In five weeks, the Dow gained 22%, its biggest consecutive five-week run on a percentage basis since 1933, when it gained 31%. The run up followed a rout that left the Dow and S&P 500 at 12-year lows and the Nasdaq at 6-year lows.
This week, stocks have been seesawing.
"I think this is a necessary consolidation at the start of what is supposed to be one of the worst reporting periods in years," said John Forelli, portfolio manager at Independence Investments.
But he said that any consolidation this time is likely to be more modest than the selloffs that followed other big rallies over the last six months.
"Investor sentiment has been improving because there's more confidence about the financial sector," he said. "There could be a 10 or 15% selloff after the rally, but there isn't the sense of panic that would cause a 25% selloff."
Thursday preview: March reports on housing starts and building permits are due from the government before the start of trading. The weekly jobless claims report is also due before the open. The Philadelphia Fed index, a regional read on manufacturing, is due shortly after the open.
On the quarterly results front, JPMorgan Chase and Nokia report profits before the opening bell. Google reports after the close.
Economy: Economic reports Wednesday continued to support hopes that the economy is getting closer to finding its footing.
A report on consumer prices showed inflation remains a non-issue as a result of the recession. Another report showed that New York-area manufacturing weakened at a slower pace in April than in March.
The Consumer Price Index (CPI), the Labor Department's key measure of inflation, fell 0.1% in March after rising 0.4% in February. Economists surveyed by Briefing.com thought it would rise 0.1%. The so-called Core CPI, which strips out volatile food and energy prices, rose 0.2% after climbing 0.2% in the previous month. Economists thought it would rise 0.1%.
CPI fell 0.4% over the last year, the first year-over-year decline since August 1955.
Industrial production fell 1.5% in March, after falling a revised 1.5% in February. Economists surveyed by Briefing.com thought it would drop 0.9%. Capacity utilization fell to 69.3% from 70.3% in the prior month. Economists thought it would fall to 69.6%.
Another report, the New York Empire State index on manufacturing activity, improved to negative 14.7 in April from negative 38.2 in March, surprising economists who were looking for a smaller improvement to negative 35.
Wednesday is also the deadline for income tax returns.
Intel: After the market close Tuesday, Intel (INTC, Fortune 500) reported weaker quarterly sales and earnings that nevertheless topped expectations. The company declined to give a current-quarter forecast, but Intel's CEO said that PC sales bottomed in the first quarter. Shares fell 2.4% Wednesday.
Company news: EBay (EBAY, Fortune 500) said late Tuesday that it plans to spin off its Skype Internet telephone unit in an initial public offering next year. Shares were little changed Wednesday.
UBS (UBS) warned that it would post a big quarterly loss and cut almost 9,000 more jobs. Shares were little changed.
Dow defense and aerospace companies Boeing (BA, Fortune 500) and United Technologies (UTX, Fortune 500) both gained, boosting the blue-chip averages. Oil services company Exxon Mobil (XOM, Fortune 500) and consumer products companies Coca-Cola (KO, Fortune 500) and Procter & Gamble (PG, Fortune 500) were the Dow's other big advancers.
Market breadth was positive and trading volume was moderate. On the New York Stock Exchange, winners beat losers three to two on volume of 700 million shares. On the Nasdaq, advancers topped decliners three to two on volume of 1.1 billion shares.
Bonds: Treasury prices dipped, raising the yield on the benchmark 10-year note to 2.79% from 2.78% Tuesday. Treasury prices and yields move in opposite directions.
Other markets: In global trading, Asian markets ended higher, with the exception of the Japanese Nikkei. European markets fell in afternoon trading.
In currency trading, the dollar fell versus the euro and gained against the yen.
U.S. light crude oil for May delivery fell 16 cents to settle at $49.25 a barrel on the New York Mercantile Exchange. Prices dropped after a government report showed weekly supplies rose more than double what was expected.
COMEX gold for June delivery rose $1.50 to settle at $893.50 an ounce. 
