Bulls get momentum

[notiCIas]

Bulls get momentum

Consumer spending, confidence reports dissolve some inflation fears for investors; GM shares jump on upgrade.

May 26, 2006: 11:49 AM EDT


NEW YORK (CNNMoney.com) - Stocks climbed Friday as investors appeared pleased about reports on consumer spending and confidence, allaying lingering fears about inflation and economic weakness.

The Dow Jones industrial average (up 54.43 to 11,265.48, Charts) and the broader Standard & Poor's 500 index (Charts) both climbed 0.4 percent more than two hours into the session. The Nasdaq composite (up 11.52 to 2,209.76, Charts) rose 0.5 percent.

 

 

Major gauges took their lead from the Commerce Department's report that personal income and spending both rose last month.

The report also showed that the prices paid by consumers on items other than food and energy rose 2.1 percent over the 12 months ending in April, up from the 2 percent reading in March.

The inflation reading, closely watched by the Federal Reserve, was scrutinized by investors who are trying to determine whether the central bank will pause or raise short-term rates again when its policy-makers meet in late June.

Elsewhere, the University of Michigan's revised consumer confidence reading showed a sizeable drop in May, Reuters reported.

The drop in confidence may point to a slowdown in consumer spending, and less inflationary pressure in the United States. Spending fuels about 70 percent of the nation's economic activity.

Some analysts, however, were not convinced all of today's economic news was good.

"The economic data that came out today points to some slowdown ahead, but nothing too serious," said Peter Cardillo, chief market analyst at S.W. Bach & Co. "But it does point to the fact that economy might be headed for a little bit of pullback especially by consumers."

In corporate news, Luxembourg steel manufacturer Arcelor SA Friday agreed to a $16.6 billion merger with a Russian steel manufacturer in an effort to block a hostile bid from Mittal Steel (Research).

Shares of GM (up $0.55 to $28.45, Research) rose another 2 percent in early trading after the world's largest automaker got a second upgrade this week.

Banking firms Merrill Lynch (up $1.24 to $72.72, Research) and Goldman Sachs (up $4.54 to $151.86, Research) also climbed after both companies received upgrades, according to Briefing.com.

Shares of the casino operator Las Vegas Sands (up $7.66 to $71.33, Research) jumped almost 11 percent after it was selected to build and run a casino in Singapore.

The Food and Drug Administration approved Celgene's (up $1.54 to $41.98, Research) Thalomid drug as a treatment for a form of blood cancer late Thursday, sending the drugmaker's shares higher.

Shares of the retailer Chico's FAS (up $1.16 to $31.14, Research) were also higher after the company reported late Thursday its first-quarter profits rose nearly 11 percent.

Internet search engine Google (up $0.67 to $383.66, Research) and No. 1 personal computer maker Dell (up $0.43 to $24.73, Research) said late Thursday that the computer maker will install Google software on its systems.

Market breadth was positive. On the New York Stock Exchange, advancers beat decliners by a margin of two to one on volume of 513 million shares. On the Nasdaq, winners beat losers also by a margin of four to three as 659 million shares changed hands.

U.S. light crude oil for July delivery rose 42 cents to $71.74 a barrel on the New York Mercantile Exchange.

Treasury prices climbed, lowering the yield on the benchmark 10-year note to 5.05 percent, down from 5.07 percent late Thursday in the shortened session ahead of the holiday weekend. Treasury prices and yields move in opposite directions.

In currency trading, the dollar rose slightly against the euro and was stronger against the yen.

COMEX gold fell 60 cents to $647.90 an ounce.

In global trade, major Asian markets rebounded from Thursday's losses, and European shares jumped in early afternoon trading.