Wall Street got over its fear of fuel costs today as crude oil prices pulled back sharply.
Crude dropped $2.83 a barrel to $63.25 -- the biggest daily decline since April -- which helped mitigate the impact of an unexpected surge in wholesale prices.
The government's producer price index jumped a full 1 percent in July and was up 0.4 percent even when energy and food prices are factored out.
Initially that report knocked down stock prices, but today's drop in oil took some of the sting out of the report, permitting a modest gain for the market.
The Dow Jones industrial average gained 37 points to close at 10,550.71. The Nasdaq Stock Market composite index advanced eight points to 2,145.15. The Standard & Poor's 500 stock index climbed a little less than a point to 1,220.24.
While stocks absorbed the inflation report, the bond market took a hit. Interest rates on 10-year Treasury bonds rose to 4.26 percent, up .06 for the day -- a large increase by bond market standards.
The jump in the producer price index was about twice what economists were expecting. Knowing that food and energy prices jump around a lot, economists often leave them out of their inflation measures. But even without them, inflation was worse than expected, with producer prices running about 2.8 percent higher than they were a year ago.
Ordinary Americans, however, pay more attention to inflation in energy prices, because they cut into their family budgets. Today's drop in crude followed a report that U.S. petroleum stocks are increasing. Professionals said that could mean the summer spike in gas prices is over. But the fuel being delivered to filling stations these days still reflects the recent record high prices, so consumers may not be as excited as economists about today's retreat in the crude oil market.