Stocks Climb on Drop in Consumer Prices

NEW YORK – Stocks rose for a second straight session Tuesday as a drop in consumer prices Tuesday allowed investors to put aside worries about inflation, at least for the short term.

With gasoline prices falling to eight-month lows, the Consumer Price Index registered a small drop in July, giving consumers a respite from soaring energy prices. With consumer spending one of the main drivers of the economy, the news cheered investors who have been concerned that higher oil prices could spur inflation.

“You’re going to get some naysayers out there, saying this is just one month, hedging against anything bad coming up, but really, this is great news,” said Bill Groenveld, head trader with vFinance Investments. “I think this could be the start of a smooth, cautious recovery.”

However, Russian oil giant Yukos’ continuing tax problems sent oil futures higher in late morning trading, taking stocks off their session highs. A barrel of light crude was quoted at $46.20, up 15 cents, on the New York Mercantile Exchange. Oil had been below the $46 mark earlier.

In late morning trading, the Dow Jones industrial average rose 18.87, or 0.2 percent, to 9,973.42. The Dow had pushed past the 10,000 mark earlier in the session; the last time the Dow closed above 10,000 was Aug. 4.

Broader stock indicators were modestly higher. The Standard & Poor’s 500 index was up 2.86, or 0.3 percent, at 1,082.20, and the Nasdaq composite index gained 13.45, or 0.8 percent, to 1,796.29.

According to the Labor Department, the CPI fell 0.1 percent in July, the first drop in prices since November and a large shift from the price gains in May and June. Without food and energy costs factored in, the CPI rose 0.1 percent, less than Wall Street had forecast.

Housing construction also saw better-than-expected gains, with the Commerce Department reporting an 8.3 percent rise in home and apartment construction in July, more than making up for the 7.7 percent drop in June.

The economic data reaffirmed that, despite soaring energy costs, the overall economy remained sound and that inflation, at least for now, has been kept at bay.

A number of earnings reports from retailers also gave investors a boost. Dow component Home Depot Inc. surged $1.33 to $35.31 after the home improvement retailer reported record sales and a 19 percent increase in second quarter profits. Home Depot beat Wall Street expectations by 7 cents per share and raised its guidance for future quarters.

Office supply chain Staples Inc. saw its profits rise 39 percent in the quarter, beating expectations by 2 cents per share. Staples, which also announced new ventures in Europe and China, gained $1.14 to $29.02.

Consumer wholesaler B.J.’s Wholesale Club Inc. was up $1.05 at $24.44 after reporting a strong 25 percent rise in second-quarter profits. The company beat estimates by 5 cents per share.

J.C. Penney Co. matched Wall Street estimates, managing a small profit for the quarter after breaking even a year ago. Penney climbed 20 cents to $38.95.

Advancing issues outnumbered decliners by nearly 2 to 1 on the New York Stock Exchange, where volume came to 406.75 million shares, compared with 349.75 million at the same point Monday.

The Russell 2000 index of smaller companies was up 4.64, or 0.9 percent, at 532.70.

Overseas, Japan’s Nikkei stock average rose 0.3 percent. In afternoon trading, Britain’s FTSE 100 was up 0.4 percent, France’s CAC-40 gained 0.7 percent and Germany’s DAX rose 0.6 percent.

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