Wall Street extended its advance today after reports showed inflation remained tame in November and US industrial production rose for the first time in two months amid increased output by vehicle makers.
The Dow Jones industrial average posted its second record close in a row, and the major indexes closed the week with substantial gains.
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 probably 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 believes 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.
The Dow rose 28.76, or 0.23%, to 12,445.52. The Dow eclipsed its record close of 12,416.76 set on Thursday, its first in nearly a month, and set a new trading high today of 12,486.30.
Eleven of the 30 stocks that comprise the blue chip index reached fresh 52-week highs today.
Broader stock indicators also moved higher. The Standard & Poor’s 500 index closed at a new six-year high, rising 1.60, or 0.11%, to 1,427.09. The Nasdaq composite index was up 3.35, or 0.14%, at 2,457.20.
Bonds were little changed, with the yield on the benchmark 10-year Treasury note flat at 4.60%, compared with late Thursday. The dollar was mixed against other major currencies, while gold prices fell.
Light, sweet crude rose 92 cents to $63.43 a barrel on the New York Mercantile Exchange.
The Labour Department said consumer prices were flat in November rather than up 0.2% 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 added 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 would continue to the end of the year before Wall Street would re-evaluate conditions in the stock market early next year.
In corporate news, Japan Tobacco agreed to acquire Britain’s Gallaher Group for about $14.7bn (€11.24bn). The deal would give the producer of Mild Seven cigarettes a bigger stake in the Western European market. Gallaher was down 51 cents at 89.99.
Several biotechnology companies saw big moves today. Immunicon soared 80 cents, or 30%, to 3.45 after the company received clearance for a breast cancer test it makes from the Food and Drug Administration.
Genta, a drug developer, fell 15 cents, or 22%, to 54 cents per share after the Food and Drug Administration rejected an application for Genasense due to the leukaemia drug candidate failing to meet its primary endpoint in a clinical trial.
Meanwhile, Apple was down 83 cents at 87.72 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 planned to restate financial statements to record charges for compensation related to past grants.
The Russell 2000 index of smaller companies was down 1.51, or 0.19%, at 792.71.
Volume on the NYSE totalled 2.11 billion shares compared with 1.57 billion traded on Thursday.
Today was a “triple-witching” day, one of the four days of the year when three types of options contracts expire. Such days usually bring higher-than-normal volume as investors jockey for new positions.