US stocks: Market rises as inflation fears are soothed

NEW YORK - US stocks rose Wednesday after a tame January consumer price index eased worries about inflation and investors bought shares beaten down on the broad sell-off in the previous session,

Investors also said minutes from the last meeting of the Federal Reserve Open Market Committee revealed little to suggest the Fed would increase the pace of future rate increases.

The blue-chip Dow and the broader Standard & Poor's 500 index got a boost from Procter & Gamble Co., which jumped 2.4 per cent to US$53.49.

UBS raised its rating on P&G to "buy" from "neutral, " citing optimism about the consumer products maker's deal to buy Gillette Co., said a trader who read the research report.

The tech-heavy Nasdaq stayed just in positive territory as Apple Computer Inc. jumped 3.4 per cent to US$88.19 after it introduced new versions of its hugely popular digital music player, including an 'iPod mini' with a color screen.

The Dow Jones industrial average closed up 62.59 points, or 0.59 per cent, at 10,673.79. The Standard & Poor's 500 Index was up 6.64 points, or 0.56 per cent, at 1,190.80. The technology-laced Nasdaq Composite Index was up 0.93 of a point, or 0.05 per cent, at 2,031.25.

US consumer prices inched up just 0.1 per cent in January, the Labor Department said. Excluding volatile food and energy costs, core CPI rose 0.2 per cent, the department said.

Wall Street economists had expected a 0.2 per cent rise in both the overall and core CPI. But traders had been bracing for larger gains after a report on Friday showed a jump in core producer prices, which raised concerns of more aggressive interest rate hikes by the Fed.

"There was a lot of relief over the CPI figure -- the fear was it was going to be higher and this would trigger a change in strategy by the Fed," said Michael Metz, chief investment strategist at Oppenheimer & Co.

"The CPI was good news which helped the markets. The Fed minutes did nothing to change that view -- there was fear the Fed notes might contain some indication they were more fearful about inflation. That fear was virtually eliminated by the notes," Metz added.

The Federal Reserve concluded at its last meeting on Feb. 1-2 that interest rates likely remained too low to keep inflation stable and held open the possibility of altering the pace of future increases, minutes of the meeting issued on Wednesday showed.

On balance, the central bank's policy-setting Federal Open Market Committee felt its policy of pushing rates up would keep inflation in check but left no doubt it intended to keep on raising them.

Robert Drust, managing director of listed trading at regional investment bank Wedbush Morgan in Los Angeles said: "I didn't see anything negative out of those minutes -- so with no new negative news, I guess the bias was up. "

Trading in stocks was active, with 1.5 billion shares changing hands on the New York Stock Exchange, just above the 1.46 billion daily average for last year. About 1.87 billion shares were traded on Nasdaq, just above the 1.81 billion daily average last year.

On the NYSE, advancing stocks outnumbered declining stocks by 2-to-1. The number of rising stocks was about equal to declining stocks on the Nasdaq.

A surge in merger activity also lifted sentiment.

Medco Health Solutions Inc. said it would buy specialty pharmacy services provider Accredo Health Inc. Accredo soared 39.3 per cent to US$42.11, while Medco was down 29 cents at US$43.14.

Yellow Roadway Corp. jumped 4.7 per cent to US$57.95 after The Wall Street Journal said the trucking company is in talks to acquire trucking and logistics concern USF Corp. USF shares rose 13 per cent to US$37.73.

- REUTERS