U.S.

Stocks Go Through The Roof

June 16, 1999 / 7:30 PM EDT / AP

Stocks soared Wednesday as steadying consumer prices calmed the market's jitters about inflation. The NASDAQ composite index, buoyed by recovering technology shares, achieved its largest one-day point gain.

The Dow Jones industrial average advanced 189.96 to 10,784.95, its best one-day gain since May 3, when it rose 225.65.

Boosted by strong earnings from business software maker Oracle, the NASDAQ composite shot up 103.16 to 2,517.83, surpassing its previous record for a one-day point gain of 96.05, set Feb. 11.

The Standard & Poor's 500 index rose 29.25 to 1,330.41.

The markets steadily advanced after the Labor Department reported that May consumer prices, excluding the volatile energy and food categories, rose a modest 0.1 percent. Clothing and auto prices declined, while medical and housing costs edged higher.

"Inflation was tame on virtually all fronts, with some key prices actually falling," said Sherry Cooper, chief economist at Nesbitt Burns, calling the market's advance a "relief rally."

The markets had been anxiously awaiting the report as a barometer of inflation in the prospering economy.

A surge in April's Consumer Price Index helped prompt the Federal Reserve to warn last month that it might boost interest rates to slow the economy's growth. Traders have been expecting an increase at the next meeting of the Fed's policy-setting Open Market Committee on June 29-30, and stock investors have been worried about the effect higher rates would have on corporate profits.

"Today's CPI number increases the likelihood that if and when we get a Fed tightening, it's more likely to be a one-time event vs. a series of tightenings," said Charles White, president portfolio manager at Avatar Associates. "It by no means indicates that we're out of the woods yet."

So far this year, the annual rate of inflation felt by consumers is 2.6 percent, compared to a 1.6 percent rise for all of 1998, the smallest in a dozen years.

In the bond market, which had also braced itself for signs of rekindled inflation, interest rates fell further from last week's 19-month high of 6.16 percent. Yields on 30-year Treasury bonds dropped soon after Wednesday's inflation report, and closed at 6.06 percent, down from 6.11 percent late Tuesday.

Technology stocks enjoyed robust gains, led by Oracle and America Online.

Oracle closed up 7 13/16 at 32 15/16 after reporting a 31 percent increase in quarterly earnings Tuesday. The earnings performance lifted investors' spirits, said White. "This is a group frankly that's been beaten up recently."

America Online rose 11 3/4 to 106 1/2.

Amazon.com closed up 15 3/16 at 111 11/16 after announcing it would invest about $45 million in a 1.7 percent stake in the posh auction house Sotheby's. The centerpiece of the alliance will be a jointly run Web site.

Advancing issues outnumbered decliners by a 13-to-7 margin on the New York Stock Exchange, with 1,998 up, 1055 down and 510 unchanged.

NYSE composite volume totaled 968.94 million shares, vs. 842.40 million Tuesday.

The NYSE composite index rose 9.89 to 632.17, and the American Stock Exchange composite index rose 1.00 to 764.92.

The Russell 2000 index of smaller companies rose 7.19 at 441.20.

Overseas, Japan's Nikkei stock average fell .32 percent. Germany's DAX index rose .72 percent, Britain's FT-SE 100 rose .83 percent, and France's CAC-40 advanced 1.44 percent.