Stocks edged higher on growth in industrial production; consumer inflation remains tame

Stocks move higher as industrial production rises

NEW YORK — Stocks picked up steam Wednesday as strength in industrial production gave investors new reason to wager that the economy is recovering.

A third day of gains by General Electric and an advance by International Business Machines helped lift the Dow Jones industrial average 100 points in afternoon trading. The Dow closed at a high for 2009 on Tuesday.

Major indexes rallied throughout the spring and summer on signs that the recession was easing, but investors are now looking for signs of actual growth to push stocks higher. The latest round of economic data showed promise and came a day after Federal Reserve Chairman Ben Bernanke said that the recession was likely over.

The Fed said industrial activity surged 0.8 percent in August, better than the 0.6 percent increase economists had forecast. The Fed also revised July’s figures to a 1 percent increase, twice as much as originally reported.

Stocks have risen in seven of the past eight days, sometimes only modestly, as investors collect more signs of improvement in the economy.

Jason Pride, director of research Haverford Investments in Radnor, Pa., welcomes the more moderate advances as a sign of stronger investor conviction.

“We’re personally much bigger fans of a more measured move in the market. Each huge swing in the market, we give some skepticism to,” he said.

In early afternoon trading, the Dow rose 102.25, or 1.1 percent, to 9,785.66, its third day of gains.

The broader Standard & Poor’s 500 index rose 13.68, or 1.3 percent, to 1,066.31, while the Nasdaq composite index rose 24.76, or 1.2 percent, to 2,127.40.

Many analysts are encouraged by the market’s climb but say it can’t continue without some drops. The S&P 500 index, the benchmark for many mutual funds, has jumped 55.6 percent since it hit a 12-year low in early March.

“We’ve been trying to tamper people’s enthusiasm even though we’re bullish in the long run,” said Peter Schwartz, principal at Gregory J. Schwartz & Co., Bloomfield Hills, Mich. “We can’t have this trajectory for perpetuity without speed bumps along the way.”

Christian Bendixen, director of technical research at Bay Crest Partners LLC in New York, said short-term investors could be jumping in at the wrong time. He predicts stocks will end the month higher but first expects the market will slide because stocks fell after similar bursts higher during the summer.

“People are looking to play catch-up at this point and I think people are rushing in to get into the market,” he said.

Shares of GE jumped $1.16, or 7.3 percent, to $17.16 extending its gains for the week and erasing its losses for the year. IBM, which carries more weight in the Dow because of its higher stock price, rose $2.20, or 1.8 percent, to $121.55.

The gains followed upbeat economic news. The Commerce Department said its Consumer Price Index, a measure of inflation at the retail level, rose 0.4 percent in August, just above the 0.3 percent rise economists polled by Thomson Reuters expected.

Excluding volatile energy and food prices, the index rose 0.1 percent and was in line with expectations.

The mild price jump at the retail level came a day after the Commerce Department said prices at the wholesale level jumped 1.7 percent in August, more than double the rise predicted by economists.

Bond prices were mixed. The yield on the benchmark 10-year Treasury note fell to 3.44 percent from 3.46 late Tuesday.

About five stocks rose for every one that fell on the New York Stock Exchange, where volume came to 833.1 million shares compared with 601.5 million traded at the same point Tuesday.

The Russell 2000 index of smaller companies rose 10.42, or 1.7 percent, to 615.26.

The dollar fell against other major currencies, while gold prices rose.

Overseas, Japan’s Nikkei stock average rose 0.5 percent. Britain’s FTSE 100 gained 1.6 percent, Germany’s DAX index rose 1.3 percent, and France’s CAC-40 surged 1.6 percent.