US stocks: Shares gain on low inflation

NEW YORK - US stocks rose for a second straight day on Thursday as economic data showing tame inflation and strong profits at high-tech companies lifted investors' optimism about interest rates and the economy.

The decision by New York City's mass transit workers to end their strike also helped sentiment by removing a drag on spending and economic activity, traders said.

The positive economic data pushed up industrial companies and conglomerates, including Caterpillar Inc. and General Electric Co., which helped to lift the Dow.

The Commerce Department said the price index for consumer spending, excluding volatile food and energy costs, edged up just 0.1 per cent in November. The index is the Federal Reserve's favorite inflation gauge.

The data, along with figures on consumer spending and income, underscored the view that the Fed may soon end its 18-month campaign of raising interest rates.

"Economic data has been supportive and earnings have been strong, so there's no reason why we can't see a rally in stocks between now and the end of the year," said Michael Metz, chief investment strategist Oppenheimer Holdings Inc. in New York.

The Dow Jones industrial average was up 55.71 points, or 0.51 per cent, at 10,889.44. The Standard & Poor's 500 Index was up 5.33 points, or 0.42 per cent, at 1,268.12. The technology-laced Nasdaq Composite Index was up 14.83 points, or 0.66 per cent, at 2,246.49.

In New York, Transport Workers Union Local 100 called off the three-day strike that had caused havoc in the city at the height of the holiday season, and union representatives and transit authorities agreed to resume negotiations.

"The end of the strike in New York City is, obviously, a positive," said Peter Cardillo, chief market analyst at S.W. Bach & Co. "Volume is dwindling because of the holidays, but there are many buyers out there." Heavy-equipment maker Caterpillar rose 2.4 per cent to US$58.45. It was Credit Suisse First Boston's top pick for 2006 in large-cap machinery.

GE shares rose 1 per cent to US$35.42 after it agreed to buy Arden Realty Inc. for about US$3.2 billion, a major purchase in Southern California's booming real estate market.

Gains in insurer American International Group Inc. also helped boost the Dow. AIG's shares rose 2.2 per cent to US$67.90 after analysts at Merrill Lynch named the stock as one of Merrill's favorite buys among large caps.

In the technology sector, Research in Motion Ltd., maker of the Blackberry wireless device, rose a day after it posted better-than-expected profit. Its shares were up 11 per cent at US$68.72.

Red Hat Inc. and Tibco Software Inc. also posted profits that exceeded Wall Street estimates. Red Hat shares gained 4.7 per cent to US$27.80, while Tibco jumped 7.4 per cent to US$7.84.

Declining shares included Albertsons Inc., which fell 3.4 per cent at US$23.28 on fears the grocery chain's plan to sell itself is in jeopardy.

Microsoft Corp. weighed on major indexes after the European Commission threatened to impose daily fines on the company for failing to comply with antitrust sanctions. ID:nL22646247 Microsoft called the decision unjustified. Its stock was off 0.5 per cent at US$26.59.

Trading was active on the NYSE, where about 1.35 billion shares changed hands, below last year's daily average of 1.4 billion, while on Nasdaq, about 1.52 billion shares traded, below last year's daily average of 1.81 billion.

Advancing stocks outpaced decliners on the NYSE by a ratio of 5 to 3, while on Nasdaq about 8 stocks rose for every 5 that fell.

- REUTERS