By Elizabeth Stanton Feb. 19 (Bloomberg) — U.S. stocks rose, erasing an earlier drop, as a lower-than-projected increase in the cost of living eased concern that the Federal Reserve will raise its benchmark interest rate to fight inflation. Boeing Co., United Technologies Corp. and Chevron Corp. led gains in the Dow Jones Industrial Average. Nine of the 10 industry groups in the Standard & Poor’s 500 Index advanced, led by banks and industrial companies. Schlumberger Ltd. declined 3 percent on a report it may buy Smith International Inc. “There’s no inflation for the Fed to fight,” Dan Greenhaus , chief economic strategist at Miller Tabak & Co. in New York. “If easy monetary policy and supportive fiscal policy have helped boost equities thus far, data such as today’s CPI argues for a continuation of supportive policies.” The Standard & Poor’s 500 Index increased 0.4 percent to 1,111.36 at 12:33 p.m. in New York. The Dow Jones Industrial Average climbed 32.88 points, or 0.3 percent, to 10,425.78, trimming its decline for 2010 to less than 0.1 percent. The Nasdaq Composite Index gained 0.3 percent to 2,248.14. Stock-index futures fell in pre-market trading after the Fed raised the discount rate it charges on loans to banks, a decision announced after exchanges closed yesterday. Futures pared their losses today after the consumer price index, a gauge of consumer inflation, rose less than forecast. Excluding food and fuel, the CPI fell 0.1 percent, its first drop since 1982. The CPI rose 0.2 percent overall. Tiger Volume Trading on all U.S. exchanges slowed at 11 a.m., when Tiger Woods , the winner of 14 major golf tournaments, apologized for his marital infidelity in a televised news conference. Volume fell to 456 million shares during the conference from an average of 576.8 million during the day’s five previous 15-minute segments, data compiled by Bloomberg shows. The S&P 500 is up 3.3 percent on the week , its biggest advance since October. The main benchmark for American equities, while still up 64 percent from a 12-year low last March, is down 3.4 percent since Jan. 19 amid concern that widening budget gaps in Greece, Portugal and Spain threaten the European economy. The Fed raised the discount rate by a quarter point to 0.75 percent, signaling a retreat from its unprecedented actions to halt the deepest financial crisis since the Great Depression. The central bank, which has provided hundreds of billions of dollars in credit to banks, bond dealers, commercial paper borrowers and troubled financial institutions, said the increase will encourage financial institutions to rely more on money markets for short-term loans. ‘On the Sidelines’ “As you go through a tightening cycle it constricts growth,” said Burt White , chief investment officer at LPL Financial in Boston, which oversees $246 billion. “That impacts future earnings, future profits, future margins. What the market’s doing now is trying to evaluate how quickly and strongly will the tightening be.” The inflation reading “lets the market know the Fed is going to be on the sidelines for a while,” he said. Boeing, the world’s second-largest commercial-plane maker, rose 2 percent to $64.17 for the biggest gain in the Dow average. United Technologies, the maker of Pratt & Whitney jet engines and Otis elevators, gained 0.9 percent to $68.73. Chevron, the second-biggest U.S. energy company, increased 0.8 percent to $74.20. Schlumberger fell 3 percent to $63.84. The Wall Street Journal on its Web site reported that the world’s largest oilfield services provider is in advanced talks to buy Smith International, one of the largest drilling-fluids providers. Smith International rose 12 percent to $37.30. Intuit, J.C. Penney Intuit Inc. rallied 8.5 percent to $32.91. The world’s biggest maker of tax-preparation software reported second- quarter profit that beat analysts’ estimates as U.S. taxpayers began filing returns and more small companies bought finance software. J.C. Penney Co. rose 7.2 percent to $27.83. The third- largest U.S. department-store chain posted profit that fell less than analysts predicted. The combined per-share earnings for the S&P 500 are $17.43 based on fourth-quarter reports by 423 companies, according to Bloomberg data, compared with a per-share loss of 9 cents in the year-earlier period, according to Standard & Poor’s. Per-share profit declined from the year-earlier figure in each of the past nine quarters, a record slump. Dell Inc. tumbled 6.7 percent to $13.46 after the personal- computer maker said holiday sales of low-priced PCs and higher component costs crimped earnings. Gross margin, the percentage of sales that remain after deducting production costs, was 17.4 percent, below the 18 percent projected on average by analysts. Apollo Group Inc. fell 6.7 percent to $57.31. The operator of the for-profit University of Phoenix forecast second-quarter earnings excluding some items of 79 cents to 84 cents a share, compared with an average estimate of 93 cents in a Bloomberg survey of 20 analysts. First Solar Inc. dropped 7 percent to $117.50, the most in the S&P 500, after the world’s largest maker of thin-film solar power modules reiterated its prior 2010 sales and profit forecasts, disappointing investors who had expected an increase. To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net .
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Stocks in U.S. Gain as Price Report Eases Concern Over Fed Rate Increases
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