AP News, December 15th, 2006
Wall Street extended its rally Friday after reports showed inflation remained tame in November and industrial production rose for the first time in two months amid increased output by automobile makers.
The data underscored a sense in the market that the economy is slowing at a reasonable pace and that inflation, a key concern of the Federal Reserve, is in check. High inflationary readings would likely make the Fed hesitant to lower short-term interest rates.
"You have a fairly benign interest rate environment which has eased the pain that oil inflicted back in the summer," said John O'Donoghue, co-head of equities at Cowen & Co. He contends the emerging economic picture and merger deals have left investors feeling emboldened and will likely help send stocks higher as the end of the year nears.
In early afternoon trading, the Dow Jones industrial average was up 41.82, or 0.34 percent, at 12,458.58. The Dow set a new trading high of 12,486.30, a day after the index rose nearly 100 points and closed above 12,400 for the first time.
Broader stock indicators were higher. The Standard & Poor's 500 index was up 2.68, or 0.19 percent, at 1,428.17, and the Nasdaq composite index was up 6.54, or 0.27 percent, at 2,460.39.
Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 4.58 percent from 4.60 percent late Thursday. The dollar was mixed against other major currencies, while gold prices fell.
Light, sweet crude rose 29 cents to $62.80 a barrel on the New York Mercantile Exchange.
The Labor Department said consumer prices were flat in November rather than up 0.2 percent as analyst had expected. Core inflation, which excludes volatile food and energy costs, was also unchanged. Lower energy prices have helped the consumer price index for the last three months. The Fed also reported a 0.2 increase in industrial production last month, the first increase after two months of declines.
O'Donoghue said the latest economic figures only add to confidence built upon during the fourth quarter from a spate of private equity and merger deals. "You're talking about very professional people that put valuations on things. They don't buy things that they deem to be expensive," he said, referring to the acquisitions.
"I think there is an enormous amount of cash in the whole system," he said, predicting the run-up in stocks will continue through the end of the year before Wall Street will re-evaluate conditions in the stock market early next year.
In corporate news, Japan Tobacco Inc. agreed to acquire Britain's Gallaher Group PLC for about $14.7 billion. The deal would give the producer of Mild Seven cigarettes a bigger stake in the Western European market. Gallaher was down 65 cents at $89.85.
Several biotechnology companies were moving Friday. Immunicon Corp. soared $1.05, or 40 percent, to $3.70 after the company received clearance for a breast cancer test it makes from the Food and Drug Administration.
Genta Inc., a drug developer, fell 18 cents, or 26 percent, to 51 cents per share after the Food and Drug Administration rejected an application for Genasense after the leukemia drug candidate failed to meet its primary endpoint in a clinical trial.
Biopure Corp. fell 16 cents, or 27 percent, to 43 cents per share after an FDA advisory panel declared the Navy's proposed clinical trial of the company's blood substitute too risky and recommended the study not take place.
Meanwhile, Apple Computer Inc. was down 67 cents at $87.90 after it delayed filing its annual report with the Securities and Exchange Commission due to an investigation into stock option grants. The company said it plans to restate financial statements to record charges for compensation related to past grants.
Illinois Tool Works Inc. fell $1.58, or 3.3 percent, to $46.34 after the manufacturer lowered its fourth-quarter profit forecast amid weakness in North American markets.
The Russell 2000 index of smaller companies was down 0.31, or 0.04 percent, at 793.91.
Advancing issues narrowly outnumbered decliners on the New York Stock Exchange, where volume came to 1.12 billion shares.
Overseas, Japan's Nikkei stock average closed up 0.51 percent. Britain's FTSE 100 closed up 0.51 percent, Germany's DAX index ended up 0.55 percent, and France's CAC-40 rose 0.58 percent.
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