|
CPI data lift stocks
|
 |
August 17, 1999: 10:14 a.m. ET
Investors feel inflation is contained, Fed rate hike will be single and limited
|
NEW YORK (CNNfn) - U.S. stock markets rose early Tuesday after Wall Street received reassurance from the consumer price index report that inflation at the retail level remains benign, leading investors to believe that the Federal Reserve will limit itself to a single small interest rate increase for the remainder of the year.
Shortly before 10 a.m. the Dow Jones industrial average gained 29.76 points to 11,076.55. On the New York Stock Exchange, gainers leaped ahead of losers 1,354 to 798 as trading volume reached 96 million shares.
The Nasdaq Composite climbed 25.48 to 2,670.76 and the S&P 500 index was up 8.70 to 1,339.47.
The bond market rallied as soon as it got word that the consumer price index rose 0.3 percent in July, in line with market predictions and giving investors reassurance that inflation remains contained despite the strength of the economy. The CPI report came less than a week after similar data showed that rising producer prices also aren't a threat.
The two sets of data, combined with other recent economic releases, helped relieve some of Wall Street's fears that higher interest rates are imminent. Although many in the market still expect the Fed to raise interest rates at its next policy meeting Aug. 24, most experts now believe the central bank will limit itself to a single rate hike, at least in the foreseeable future.
The bellwether 30-year Treasury bond gained 22/32 of a point in price, lowering its yield to 6.04 percent from 6.09 percent at the market close Tuesday.
The dollar gained solid ground against the euro and traded modestly lower against the yen.
Financials, techs like absent inflation
In the stock market, the two sectors most sensitive to interest rate movements were the first to rally as market players found few reasons to fear that rising inflation will lead to higher interest rates.
Financial services companies, whose lending business flourishes in times of low and stable interest rates, led the blue chip rally, followed by technology issues, which rely heavily on borrowing for growth.
Among the Dow's financial components, shares of American Express (AXP) jumped 3-5/8 to 139-1/2, Citigroup (C) advanced 1-11/16 to 48 and J.P. Morgan (JPM) added 3/4 to 134-13/16.
The technology components of the 30 blue chips index, however, failed to contribute their share to the rally, with IBM (IBM) easing 1/2 to 126-7/8. And Hewlett Packard (HWP) shares sank 5-1/8 to 105-1/8 as investors took profits from a strong run-up in the stock Tuesday, when the company released stronger-than-anticipated fiscal third-quarter earnings.
Other technology shares also showed selective gains as investors braced for more earnings news from key components of the sector. Shares of Dell Computer (DELL), due to report its latest results after the closing bell, inched up 9/16 to 42, and Applied Materials (AMAT), also expected to deliver earnings Wednesday, eased 5/8 to 69-7/8.
But other technology leaders, especially some Internet shares, got a strong boost from the friendly CPI report. Shares of Amazon.com (AMZN) gained 6-7/16 to 104-3/4 and Yahoo! (YHOO) rose 4-11/16 to 139-3/16. Web venture capitalist CMGI (CMGI) saw its stock climb 3 to 85-1/8. 
|
|
|
|
|
 |
|
