New York – Wall Street surged again Thursday, launching the Dow Jones industrial average to its best two-day advance since last July after data showed that wholesale inflation, excluding energy and food costs, is rising at a gentle pace.
The market was unfazed by the Labor Department’s Producer Price Index, which rose 0.9 percent in May because of surging gasoline prices – a bigger increase than in April and higher than economists predicted. Investors instead were pleased that the core PPI, which strips out often-volatile food and energy costs, posted a 0.2 percent rise, as expected, after a flat reading in April.
If core inflation is under control, the Federal Reserve is unlikely to lift interest rates, a possibility that started dogging the market last week, when the yield on the benchmark 10-year Treasury note passed 5 percent for the first time since last summer.
The 10-year yield edged up Thursday to 5.23 percent from 5.21 percent late Wednesday but stayed well below the peak of 5.30 percent reached Tuesday. The market’s initial dismay over rising bond yields and the diminishing chance of a rate cut seems to have abated; with Treasury yields appearing stable, the market is more at ease, said Jay Suskind, head trader at Ryan Beck & Co.
“Now, perhaps the glass is being seen as half-full,” Suskind said. “If the reason for higher interest rates is growth, well, at the end of the day, that’s what grows corporate earnings.”
The Consumer Price Index, an inflation gauge that is even more closely watched by the Fed than the PPI, will be released today.
The Dow rose 71.37, or 0.53 percent, to 13,553.72.
Broader stock indicators also rose Thursday. The Standard & Poor’s 500 index advanced 7.30, or 0.48 percent, to 1,522.97, and the Nasdaq composite index climbed 17.10, or 0.66 percent, to 2,599.41.
