U.S. Stocks To Open At Higher Levels After Inflation Data

NEW YORK (MarketWatch) -- U.S. stocks are set to open at marginally higher levels Thursday, as investors take in an unexpectedly large rise in producer prices and earnings reports from Wall Street banks Goldman Sachs and Bear Stearns.

Investors also will be alert to comments on the mortgage-backed bond market, particularly from Bear Stearns . One of its hedge funds is looking to unload $4 billion worth of mortgage-backed bonds.

The futures contract for the Dow Jones Industrial Average last was up 5 points at 13,610.

The futures contracts for the S&P 500 and the Nasdaq 100 last were 0.70 point higher at 1,530.90 and up 7.8 points at 1,940.0.

Stocks rallied on Wednesday, when the Dow Jones industrials surged 187 points, the Nasdaq Composite rose 32 points and the S&P 500 advanced 22.7 points. The gains were linked to lower bond yields in the wake of an economic survey suggesting moderate growth and little inflation.

On Thursday, investors will pay attention to the latest data. The futures contracts clung to their gains after the Labor Department reported that wholesale prices rose 0.9% in May.

The core producer price index, which excludes volatile food and energy prices, rose 0.2%, the first increase in three months.

Economists surveyed by MarketWatch were looking for smaller increases of 0.6% on the headline PPI and a 0.1% increase for the core PPI.

"The biggest concerns in the market right now are higher interest rates and inflation," said art Hogan, chief market strategist at Jefferies & Co. "The PPI report could be broadly defined as being benign. This should be enough to keep market participants calm They will look for confirmation tomorrow in the CPI report."

Filings for state unemployment benefits were unchanged in the week ending June 9 at 311,000, according to the Labor Department. Economists surveyed by MarketWatch were looking for smaller increases of 0.6% on the headline PPI and a 0.1% increase for the core PPI.

Stocks on the move

Bear Stearns last was 2% lower at $146.56. In addition, to the concerns about its hedge fund exposure to mortgage-backed bonds, the bank released its second-quarter earnings report. The company's earnings fell below year-earlier levels due to a special charge.

Goldman Sachs reported quarterly earnings that beat expectations and exceeded the year-earlier result. That stock last was 6 cents higher at $233.70.

Colgate-Palmolive could encounter selling pressure. The company found counterfeit versions of Colgate toothpaste in four states.

United Technology Corp. , a Dow component, raised its quarterly dividend by 21% to 32 cents a share.

Other markets

Treasurys opened lower and extended their losses after the stronger-than-expected increase in producer prices. Gains in inflation increase the prospect that the Federal Reserve will be forced to lift rates to slow the economy.

The benchmark 10-year-note fell 3/32 to 94-17/32 with a yield of 5.215%.

The dollar rallied to a new four-and-a-half year peak against the yen and rose against the euro after the latest inflation news. The euro was last down 0.2% at $1.3290, while the dollar was up 0.4% at 123.04 yen, after rising to 123.11 yen, the loftiest level since December 2002.

Gold futures remained in a tight range, as the dollar staged its rally. The August futures contract last was down 20 cents at $652.50 an ounce.

The July crude futures contract was marginally higher, up 29 cents at $66.55 a barrel.

By Leslie Wines