NEW YORK (AP) - Wall Street advanced Wednesday after a better-than-expected report on consumer prices tempered some of the market's concerns about inflation.
The Labor Department's report that consumer prices advanced 0.2 percent in April after rising 0.3 percent in March seemed to alleviate investors' worries that the recent surge in energy costs would force prices throughout the economy to spike higher. The moderation in prices comes despite the largest jump in food prices in 18 years.
Wall Street has been concerned that higher food and energy costs are cutting into consumers' ability to spend. Any pullback is an unnerving prospect for investors because consumer spending accounts for more than two-thirds of U.S. economic activity.
Marc Pado, U.S. market strategist for Cantor Fitzgerald, said the tame consumer prices reading, along with recent figures on productivity, indicate that businesses are swallowing some of the rising costs they face and not passing all of them to consumers.
"You have higher input costs but you're getting more out of your workers so therefore you're able to control your output costs," he said. "The economy is lean and mean and doing well even though on the demand side it's slumping."
The Dow rose 66.20, or 0.51 percent, to 12,898.38. A late sell-off in technology stocks caused the market to pare its gains, with the blue chip index at times up more than 150 points.
Broader stock indicators also advanced. The Standard & Poor's 500 index rose 5.62, or 0.40 percent, to 1,408.66. The Nasdaq composite index rose 1.58, or 0.06 percent, to 2,496.70.
Light, sweet crude oil fell $1.58 to settle at $124.22 a barrel on the New York Mercantile Exchange.
Bond prices ticked lower as stocks advanced. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.92 percent from 3.94 percent late Tuesday.
The dollar was mixed against other major currencies, while gold prices fell.
Though Wednesday's data was comforting and major indexes are approaching their highs of the month, that doesn't mean Wall Street has conquered its problems and is set for a rebound from months of turmoil. Analysts warn that examining stocks by sector shows that one in particular is still being left behind - financials.
Steve Goldman, chief market strategist at Weeden & Co., said he remains troubled about the financial industry's underperformance amid lingering worries that the credit crisis is still not over. He said that sector has been pulled higher by the market's recent overall rise, but isn't taking the leadership position needed to lead a bona fide rally.
"They tend to outperform the S&P by a 50 percent margin, but we're not seeing that at all," he said of financials. "This has been a nice rally, but for those of us that are bullish about the market, we're going to need to see them outperform in order to feel comfortable going long."
Concerns that major investment banks and retail banks have more write-downs in coming quarters has put pressure on their stock prices. For instance, Lehman Brothers Holdings Inc. is down about 8.5 percent from its highs this month, while the S&P is down by only 1 percent.
"They led us into the crisis, but they're not yet leading us out of it," he said. "That's what needs to happen."
On Tuesday, leadership went to technology stocks - with the Nasdaq at one point up 1.3 percent. However, investors collected profits during the last hour of trading and sent big tech names sharply lower. Apple Inc. fell $3.70, or 2 percent, to $182.26, after trading as high as $192.24 during the session.
In corporate news, Macy's Inc. reported it lost $59 million in the first quarter because of weaker sales and costs tied to combining businesses. But the results topped Wall Street's expectations and the stock rose 87 cents, or 3.6 percent, to $24.93.
Deere & Co. said its fiscal second-quarter profit rose 22 percent as higher crop prices drove global demand for its farm equipment. But the company said rising costs of raw materials could eat into its profits in the coming months. Deere fell $8.94, or 9.9 percent, to $81.25.
Jack in the Box Inc. fell $2.90, or 9.9 percent, to $24.87 after the fast food chain said sales at restaurants open at least a year fell short of forecasts for the fiscal second quarter. The company lowered its sales target for the third quarter.
Advancing issues outnumbered decliners by more than 3 to 2 on the New York Stock Exchange, where consolidated volume came to 3.86 billion shares, which is about even with Tuesday.
The Russell 2000 index of smaller companies fell 0.78, or 0.11 percent, to 736.07.
Overseas, Japan's Nikkei stock average rose 1.18 percent. In afternoon trading, Britain's FTSE 100 rose 0.07 percent, Germany's DAX index rose 0.33 percent, and France's CAC-40 advanced 1.13 percent.
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