NEW YORK (AP) - Stocks came off early losses to finish higher Wednesday as
investors seemed to absorb unpleasant signals about the economy with equanimity
and draw comfort from the notion that the Federal Reserve didn't appear overly
concerned about inflation.
A rebound in hard-hit stocks of financial companies helped fuel the
session's turnaround, while an upbeat forecast from Hewlett Packard Co. pulled
technology issues higher and record prices for oil gave a boost to energy
stocks.
Stocks began the day lower amid concern about a rise in consumer prices and
lackluster readings on home construction. But observers said the economic
figures ultimately didn't prove all that surprising given a recent run-up in oil
prices and the well-documented woes of the housing sector.
Investors had already begun to check some of their concerns when minutes
from the Fed's meetings last month indicated the central bank didn't seem to be
extremely worried about inflation. The apparent lack of urgent concern that
lower interest rates would foment a rise in prices was perhaps welcome given the
latest readings on consumer prices and the rise in oil.
The absence of surprises from the Fed minutes underscored the notion that
policyamkers will first address the flagging economy and worry later about
inflation and allowed investors to perhaps snap up some bargains and focus on
upbeat news.
Thomas J. Lee, equities analyst at JPMorgan said the Fed's deliberations
indicate the central bank could quickly step in to address inflation should that
become necessary but that shoring up the economy would remain its immediate
concern.
"It's a very different Fed. It's not a Greenspan Fed. Gradualism is out,"
Lee said.
According to preliminary calculations, the Dow rose 90.04, or 0.73 percent,
to 12,427.26.
Broader stock indicators also moved higher. The Standard & Poor's 500 index
advanced 11.25, or 0.83 percent, to 1,360.03, and the Nasdaq composite index
rose 20.90, or 0.91 percent, to 2,327.10.
Bond prices fell Wednesday. The yield on the 10-year Treasury note, which
moves opposite its price, rose to 3.89 percent from 3.87 percent late Tuesday.
The dollar was higher against most major currencies, while gold prices fell.
Light, sweet crude oil on the New York Mercantile Exchange rose 73 cents to
settle at a record $100.74 a barrel. Oil closed above $100 for the first time
Tuesday, derailing a stock market rally and renewing Wall Street's inflation
concerns.
Economic news initially sent stocks lower Wednesday. The Labor Department
reported a 0.4 percent increase in the consumer price index, and a 0.3 percent
increase in the core consumer price index, which strips out often-volatile
energy and food prices. The increases came in slightly higher than economists
surveyed by Thomson Financial/IFR had anticipated.
Investors have at times shown concern that inflation could accelerate at the
same time the economy suffers under tough credit conditions. The phenomenon of
slowing growth and surging prices is known as stagflation.
The housing data for a time also weighed on investors. The Commerce
Department reported that housing starts rose by 0.8 percent in January, but only
after plunging by a downwardly revised 14.8 percent in December. Building
permits, a more forward-looking indicator, fell by 3 percent.
By the afternoon, stocks turned positive after big names in the financial
sector began to rebound and as H-P extended its advance.
"The earnings picture has actually been pretty good," Lee said. "H-P had a
solid beat, and pretty decent guidance."
Hewlett-Packard late Tuesday posted a 38 percent surge in fiscal
first-quarter profit following an increase in computer sales. The company, one
of the 30 stocks that comprise the Dow Jones industrial average, raised its
profit forecast for the year. H-P shares rose $3.49, or 7.9 percent, to $47.44.
Lehman Brothers Holdings Inc. rose $1.82, or 3.4 percent, to $55.39, while
Morgan Stanley rose $2.06, or 5 percent, to $43.55 after hitting a fresh 52-week
low in the session.
In other corporate news, the Financial Times reported that KKR Financial
Holdings LLC, a listed affiliate of U.S. private equity group Kohlberg Kravis
Roberts & Co., has delayed repayment of billions of dollars of commercial paper
for the second time. Commercial paper are short-term bonds companies sell to
quickly raise cash; demand for commercial paper began drying up last year,
choking the credit markets.
KKR Financial fell 28 cents to $14.25.
Drug maker Pfizer Inc. said it would buy biopharmaceutical company Encysive
Pharmaceuticals Inc. for about $195 million to strengthen its portfolio in
products treating high blood pressure. Encysive surged $1.19, or 110 percent, to
$2.27, while Pfizer rose 10 cents to $22.47.
Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock
Exchange, where volume came to 1.47 billion shares compared with 1.4 billion
shares Tuesday.
The Russell 2000 index of smaller companies rose 7.68, or 1.09 percent, to
710.02.
Overseas, Japan's Nikkei stock average closed down 3.25 percent. Britain's
FTSE 100 closed down 1.23 percent, Germany's DAX index lost 1.47 percent, and
France's CAC-40 fell 1.49 percent.
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