US stocks rise

US stocks regained ground today as the market’s cautious optimism was restored by government data showing only modest inflation, better-than-expected corporate earnings, announcements of two merger deals and the report of a third.

The Dow Jones industrial average rose 62.59, or 0.59%, to 10,673.79, following a 174-point slide on Tuesday.

Analysts said a reflex rally was to be expected after the previous session, which most thought had been oversold.

The broader gauges were also higher. The Standard & Poor’s 500 index gained 6.64, or 0.56%, at 1,190.80.

The Nasdaq composite index was up 0.93, or 0.05%, at 2,031.25.

The Labor Department reported a tiny 0.1% rise in its Consumer Price Index for January, as energy costs slid for a second straight month. The data, which suggests consumer inflation remains very much under control, was at odds with Friday’s reading of the Producer Price Index, which showed higher inflation for wholesale goods. While the discrepancy was puzzling to some, it provided a needed lift for stocks.

“We’ll just call this ‘better than yesterday’,” said Arthur Hogan, chief market analyst at Jefferies & Co in Boston. “Last week we got the surprise in the PPI and we didn’t get the corresponding surprise in the CPI, which means the raw material costs are not being passed on to the end user with the finished goods, so that’s good news on the inflation front. That makes us less worried the Federal Reserve will need to step up its rate tightening.”

Treasuries rallied on the inflation data, sending the yield on the 10-year note to 4.26%, down from 4.29% late on Tuesday. The newly released minutes of the Fed’s Open Market Committee’s policy meeting, held earlier this month, inspired further buying.

The dollar, which tumbled on Tuesday on rumours that South Korea planned to diversify its currency holdings away from the greenback, recovered somewhat after Seoul’s central bank denied the report. Gold fell, as did oil prices, which skidded 25 cents to 51.17 per barrel on the New York Mercantile Exchange.

Toll Brothers rose 4%, or 3.21, to 84.25, as soaring demand for luxury homes boosted profits in the first quarter, prompting the company to raise delivery estimates for 2005. Its earnings blew past the estimates of analysts surveyed by Thomson First Call.

Lowe’s Cos was up 37 cents at 57.90 after the US’s second-largest home improvement chain reported a nearly 27% rise in fourth quarter earnings on an almost 18 % increase in sales. The results beat Wall Street’s expectations by a wide margin, but forecasts disappointed investors.

Chiquita Brands International was up 5 cents at 22.05 after the banana grower announced plans to acquire Fresh Express, the US’s top seller of bagged salads, from Performance Food Group for US$855m (€647.57m) in cash. The announcement came a day after Chiquita reported its profit more than tripled in the fourth quarter.

Pharmacy benefits manager Medco Health Solutions was down 29 cents at 43.14 after saying it had agreed to buy Accredo Health, a distributor of specialty drugs and services, for about 2.2 billion in cash and stock. The deal would create the nation’s largest specialty pharmacy business, Medco said. Accredo shares surged 39%, or 11.87, to 42.11.

Trucking company USF jumped 13 %, or 4.37, to 37.73, after The Wall Street Journal reported that Yellow Roadway was in talks to acquire it in a deal possibly valued at more than 1 billion. Yellow shares added 4.7%, or 2.60, to 57.95.

Advancers outnumbered declining issues by about 2 to 1 on the New York Stock Exchange.

The Russell 2000 index, which tracks smaller company stocks, was up 2.61, or 0.42%, at 620.54.