Dow Ends Up 29 on Tame Inflation Data

Specialist Anthony Campagna, right, directs trading in shares of Best Buy on the floor of the New York Stock Exchange, Tuesday Dec. 12, 2006. Best Buy Co. Inc. said Tuesday its third-quarter profit rose 9 percent as customers bought more expensive products, but results were below expectations as the nation's biggest consumer electronics retailer made greater use of promotions to move merchandise. (AP Photo/Richard Drew) (Richard Drew - AP)

NEW YORK -- Wall Street extended its advance Friday after reports showed inflation remained tame in November and industrial production rose for the first time in two months amid increased output by automobile makers. The Dow Jones industrial average posted its second straight record close, 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 likely make the Fed hesitant to lower short-term interest rates; the Fed kept rates steady at its meeting on Tuesday.

"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 contends 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 percent, to 12,445.52. The Dow eclipsed its record close of 12,416.76 set Thursday, its first in nearly a month, and set a new trading high Friday of 12,486.30. Eleven of the 30 stocks that comprise the blue chip index reached fresh 52-week highs Friday.

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 percent, to 1,427.09. The Nasdaq composite index was up 3.35, or 0.14 percent, at 2,457.20.

Friday's gains were somewhat tepid, however, as declining issues outnumbered advancers 6 to 5 on the New York Stock Exchange. For the week, which saw stocks rally on renewed confidence in the economy, the Dow rose 1.12 percent, the S&P advanced 1.22 percent and the Nasdaq rose 0.81 percent.

Bonds were little changed, with the yield on the benchmark 10-year Treasury note flat at 4.60 percent from 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 Labor Department said consumer prices were flat in November rather than up 0.2 percent 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 add 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 will continue through the end of the year before Wall Street will re-evaluate conditions in the markets early next year.

In corporate news, Japan Tobacco Inc. agreed to acquire Britain's Gallaher Group PLC for about $14.7 billion. 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.