Stocks Cheered by Retail and Inflation Data

Stocks on Wall Street rose more than 1 percent Tuesday morning after American and Chinese economic data drew investors into an equities market that has been through six weeks of sharp declines.

In the United States, retail sales declined for the first time in nearly a year, but the decline was less than forecast, and so the report helped push stock prices higher and offered some respite to investors overwhelmed by recent weak economic data.

Despite the jump, some investors were still focused on a retreat in the Standard Poor’s 500-stock index to its March low near the 1,250 level. The index closed at 1,271.83 on Monday.

“The consumer isn’t dead,” said Michael Farr, president of investment management firm Farr, Miller Washington in Washington. “I question the sustainability, given the high levels of debt that consumers hold and the unemployment rate. But we don’t want to look a gift horse in the mouth. It’s good news for the day.”

In early trading Monday, the Dow Jones industrial average gained 115.83 points, or 1 percent, bringing it back over the 12,000 mark to 12,068.80 points. The S. P. rose 14.53 points, or 1.1 percent, to 1,286.36, and the Nasdaq composite index added 32.13 points, or 1.2 percent, to 2,671.82.

The S. P. 500 is down more than 7 percent from its high in early May as soft data sparked worries about the sustainability of the economic recovery.

In China, inflation is still a concern after data showed consumer prices rose at their fastest pace in almost three years, but industrial output grew 13.3 percent from a year ago, in line with forecasts.

China’s central bank later increased the reserve requirement ratio for commercial lenders by 50 basis points.

“News out of China is somewhat encouraging in spite of the fact they raised reserve requirements,” said Peter Cardillo, chief market economist at Avalon Partners in New York. He said the data is a sign that perhaps China’s economy “can avoid a hard landing, and that’s cheering the markets.”

“The real focus will be on the fact that the market is in a technical correction,” Mr. Cardillo said. “We have options expiration this week, so any rallies might continue to be short-lived.”

Article source: http://www.nytimes.com/2011/06/15/business/15markets.html?partner=rss&emc=rss