A mild inflation reading revitalized financial markets Friday, with stocks staging a broad rally as long-term interest rates moved back below 7 percent for the second time this week.
Technology and smaller-company issues ended a weeklong slump, boosting the Nasdaq market and other related indexes back into record territory.The Dow Jones industrial average rose 43.00 points to 5,518.14 after retreating several times from gains of more than 50 points. For the week, the barometer of 30 big U.S. companies gained 40.11.
The Dow and broader measures have been gyrating over the past week, spurred by a procession of mixed signals on inflation and rising bond yields. But on Friday, stocks surged in the morning and then steadied, holding most of their gains through the close.
Before the stock market opened, the government reported a surprisingly small increase in wholesale prices during April. Bonds rallied and the yield on the 30-year Treasury bond - a benchmark rate that can affect corporate borrowing costs and consumer spending - fell to 6.92 percent from 7.01 percent late Thursday.
The Labor Department said producer prices rose 0.4 percent in April, as a decline in food costs was offset by a big jump in energy costs. But excluding the volatile food and energy components, the so-called core rate of inflation was up only 0.1 percent in April. The news contrasted with recent reports indicating rapid economic growth and increased consumer spending power.
Speculative issues fared even better than the blue chips, with the Nasdaq composite and other indexes dominated by technology and smaller-company shares resuming their powerful rally for the first time since a broad sell-off began May 2.
The Nasdaq composite index and the Russell 2000 list of smaller companies set new highs for the first time since both ended a 10-session streak of record closes in that retreat.
The Nasdaq composite index rose 14.94 to 1,202.76, closing above the 1,200-mark for the first time. The Russell 2000 rose 3.52 to 351.15. The American Stock Exchange's market value index, which is also dominated by smaller companies, rose 4.12 to 591.33.
Advancing issues outnumbered decliners by about 7 to 3 on the New York Stock Exchange, where volume totaled 428.37 million shares as of 4 p.m., up from Thursday's pace. The NYSE's composite index rose 3.41 to 350.02 and the Standard & Poor's 500-stock index rose 6.65 to 652.09.
Although most sectors shared in the rally, cyclical issues that are sensitive to the health of the economy were big gainers. Among the Dow industrials, the three biggest gainers were Boeing; up 21/8 to 793/8, United Technologies up 17/8 to 1101/8, and Alcoa, up 11/4 to 657/8.
"We're seeing an upcycle in terms of aircraft orders," said Robert Streed, senior investment adviser at Northern Trust in Chicago, noting that United Technologies was also benefiting from a deal with General Electric to jointly develop engines for a new Boeing plane. "That has the potential of being very meaningful in terms of savings for United Technologies."
The technology sector was boosted by another strong earnings report from an industry bellwether. Cisco Systems, up 21/4 at 55, announced late Thursday that its profit rose 84 percent in its fiscal third quarter. The computer networking company's results exceeded most Wall Street forecasts.
Some semiconductor issues rose despite another dreary report on chip demand. After the market closed Thursday, the Semiconductor Industry Association reported that its book-to-bill ratio fell for the fourth straight month, but the decline was narrower than in March. In active Nasdaq trading, Intel rose 1/2 to 691/8. On the NYSE, Motorola rose 1/4 to 605/8, but Texas Instruments sagged 7/8 to 527/8.
Overseas, Tokyo's Nikkei stock average edged higher, Frankfurt's DAX index ended slightly lower, and London's FT-SE 100 rose 0.7 percent.