Tame Core Inflation Lifts Stocks

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Published April 15, 2011

| FOXBusiness

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Fresh data suggesting soaring energy prices haven't yet seeped into the broader price level eased traders' concerns, sending stocks into the green. 

Today's Markets

The Dow Jones Industrial Average was up 56.7 points, or 0.46%, to 12,342, the S&P 500 gained 5.2 points, or 0.39%, to 1,320 and Nasdaq Composite traded higher by 4.4 points, or 0.16%, to 2,765. The FOX 50 climbed 0.58 point to 925. 

Health care issues like Merck (MRK) and Amgen (AMGN) performed the best on the day.  Technology shares like Apple (AAPL) and Cisco (CSCO) lagged behind. 

The markets were little changed for a second-straight week. The Dow lost 0.31%, the S&P 500 slipped 0.64% and the Nasdaq  was down 0.57%. 

Inflation at the consumer level climbed 0.5% in March from February, driven by accelerating energy prices and food prices.  Indeed, food prices jumped at the fastest rate since July 2008.  Excluding volatile food and energy prices, so-called core-CPI edged higher by 0.1%, slightly lower than the 0.2% economists forecast. 

Policymakers generally pay more attention to the core reading since it's more easily affected by monetary and fiscal policy moves than food and energy, which tend to sway based on exogenous factors. 

Many economists have raised concerns that the high price of energy will seep into other prices, creating dangerous long-term inflation.  While those concerns largely haven't come to fruition, some analysts believe recent data foreshadow a rise down the line. 

"The question though is not if but when the core rate starts to move higher in a more pronounced fashion," wrote Peter Boockvar, managing director at Miller Tabak + Co.. 

Producer prices were up 0.7% for the month, as energy prices soared, a report released Thursday said. 

On the corporate front, Johnson & Johnson (JNJ) is in talks to acquire Synthes -- a Swiss health care company -- in a deal that could be worth at much as $20 billion, according to a report by the Wall Street Journal, citing sources. 

Corporate results have been in focus in recent session as earnings season ramps up. 

Bank of America (BAC), the largest U.S. bank, said Friday its first-quarter profits slid 38% on a year-over-year basis to $2 billion, driven by losses in its mortgage division.

Google's (GOOG) first-quarter earnings climbed 17% but missed analysts' expectations.  Shares of the search-behemoth were off more than 8% as higher-than-expected capital expenditures spooked traders. 

Oil prices have jumped 20% since the beginning of 2011. However, they were off $3.13 for the week. 

Light, sweet crude climbed $1.55, or 1.4%, to $109.66.  Gasoline prices at the consumer level continue moving higher and are currently 29 cents off the record-high of $4.11 from July 2008.  A gallon of regular gas costs $3.82 on average nationwide, up from $3.55 last month and $2.86 last year, according to the AAA Fuel Gauge Report. 

Oil prices are lower on the week as the risk of a supply disruption has moderated to some extent, and fears about high prices cutting into demand have grown. 

The U.S. dollar ticked 0.16% higher against a group of world currencies and the euro slid 0.23% against the greenback.

Gold jumped $13.60, or 0.92%, to $1,486. 

Corporate News 

Urban Outfitters (URBN) shares were under pressure after the apparel-maker surprisingly lost one of its key executives. 

Chesapeake Energy (CHK) unveiled plans to acquire Bronco Drilling Company (BRNC) for roughly $315 million. 

Infosys (INFY), India's second-largest software exporter, revealed disappointing fiscal fourth-quarter results, sending shares plummeting nearly 10%.

A diabetes drug co-developed by Eli Lilly (LLY), Amylin Pharmaceuticals (NASDAQ:AMLN) and Alkermes (ALKS) garnered approval for the treatment of Type 2 diabetes from European regulators. 

Foreign Markets

The English FTSE 100 was up 0.54% to 5,996, the French CAC 40 was down 0.1% to 3,974 and the German DAX climbed 0.44% to 7,178. 

In Asia, the Japanese Nikkei 225 was down 0.65% to 9,592 and the Chinese Hang Seng edged lower by 0.02% to 24,008. 

URL

http://www.foxbusiness.com/markets/2011/04/15/futures-drift-lower/