US stocks rise

US stocks came off early losses to finish higher today as investors seemed to absorb unpleasant signals about the economy with equanimity and draw comfort from the notion that the Federal Reserve did not appear overly concerned about inflation.

A rebound in hard-hit stocks of financial companies helped fuel the session’s turnaround, while an upbeat forecast from Hewlett Packard Co. pulled technology issues higher and record prices for oil gave a boost to energy stocks.

Stocks began the day lower amid concern about a rise in consumer prices and lacklustre readings on home construction.

Observers said however that the economic figures ultimately did not prove all that surprising given a recent run-up in oil prices and the well-documented woes of the housing sector.

Investors had already begun to check some of their concerns when minutes from the Fed’s meetings last month indicated the central bank did not seem to be extremely worried about inflation.

The apparent lack of urgent concern that lower interest rates would foment a rise in prices was perhaps welcome given the latest readings on consumer prices and the rise in oil.

The absence of surprises from the Fed minutes underscored the notion that policymakers will first address the flagging economy and worry later about inflation and allowed investors to perhaps snap up some bargains and focus on upbeat news.

Thomas J. Lee, equities analyst at JPMorgan said the Fed’s deliberations indicate the central bank could quickly step in to address inflation should that become necessary but that shoring up the economy would remain its immediate concern.

“It’s a very different Fed. It’s not a Greenspan Fed. Gradualism is out,” Lee said.

The Dow rose 90.04, or 0.73%, to 12,427.26.

Broader stock indicators also moved higher. The Standard & Poor’s 500 index advanced 11.25, or 0.83%, to 1,360.03, and the Nasdaq composite index rose 20.90, or 0.91%, to 2,327.10.

Bond prices fell. The yield on the 10-year Treasury note, which moves opposite its price, rose to 3.89% from 3.87% late on Tuesday. The dollar was higher against most major currencies, while gold prices fell.

Light, sweet crude oil on the New York Mercantile Exchange rose 73 cents to settle at a record US$100.74 a barrel.

Oil closed above $100 for the first time on Tuesday, derailing a stock market rally and renewing Wall Street’s inflation concerns.

Economic news initially sent stocks lower. The Labor Department reported a 0.4% increase in the consumer price index, and a 0.3% increase in the core consumer price index, which strips out often-volatile energy and food prices.

The increases came in slightly higher than economists surveyed by Thomson Financial/IFR had anticipated.

Investors have at times shown concern that inflation could accelerate at the same time the economy suffers under tough credit conditions. The phenomenon of slowing growth and surging prices is known as stagflation.

The housing data for a time also weighed on investors. The Commerce Department reported that housing starts rose by 0.8% in January, but only after plunging by a downwardly revised 14.8% in December. Building permits, a more forward-looking indicator, fell by 3%.

By the afternoon, stocks turned positive after big names in the financial sector began to rebound and as H-P extended its advance.

“The earnings picture has actually been pretty good,” Lee said. “H-P had a solid beat, and pretty decent guidance.”

Hewlett-Packard late yesterday posted a 38% surge in fiscal first-quarter profit following an increase in computer sales. The company, one of the 30 stocks that comprise the Dow Jones industrial average, raised its profit forecast for the year. H-P shares rose 3.49, or 7.9%, to 47.44.

Lehman Brothers Holdings Inc. rose 1.82, or 3.4%, to 55.39, while Morgan Stanley rose 2.06, or 5%, to 43.55 after hitting a fresh 52-week low in the session.

In other corporate news, the Financial Times reported that KKR Financial Holdings LLC, a listed affiliate of US private equity group Kohlberg Kravis Roberts & Co., has delayed repayment of billions of dollars of commercial paper for the second time.

Commercial paper are short-term bonds companies sell to quickly raise cash; demand for commercial paper began drying up last year, choking the credit markets.

KKR Financial fell 28 cents to 14.25.

Drug maker Pfizer Inc. said it would buy biopharmaceutical company Encysive Pharmaceuticals Inc. for about 195m (€132.5m) to strengthen its portfolio in products treating high blood pressure.

Encysive surged 1.19, or 110%, to 2.27, while Pfizer rose 10 cents to 22.47.

Advancing issues outnumbered decliners by about three to two on the New York Stock Exchange, where volume came to 1.47 billion shares compared with 1.4 billion shares Tuesday.

The Russell 2000 index of smaller companies rose 7.68, or 1.09%, to 710.02.