Stocks Surge on Inflation Figures (AP)

By JOE BEL BRUNO AP Business Writer

NEW YORK — Wall Street bounded higher Tuesday, propelling the Dow Jones industrials past 13,400 for the first time, after mild inflation figures raised hopes the Federal Reserve might cut interest rates later this year.

Investors were encouraged to extend the market's months-long rally after the Labor Department reported prices paid by consumers rose less than expected in April, and indicated that inflation may be easing as the economy continues to cool. The consumer price index rose 0.4 percent after rising 0.6 percent in March, while core prices _ which exclude food and energy _ rose 0.2 percent after a 0.1 percent gain.

"It's certainly a good reaction to a lower-than-expected headline inflation number and that gives the Fed some will room if it needs to cut rates," said Nick Raich director of research at National City Private Client Group, referring to the Federal Reserve's next move on short-term interest rates.

Dow components Home Depot Inc. and Wal-Mart Stores Inc. handed Wall Street disappointing first-quarter results. Both companies are considered to be proxies for consumer spending, and weaker sales were translated as another sign the economy continues to moderate.

In midmorning trading, the Dow rose 91.42, or 0.68 percent, to 13,438.20 after rising to a new trading high of 13,452.75.

Broader stock indicators also advanced. The Standard & Poor's 500 index was up 8.85, or 0.59 percent, at 1,512.00, while the Nasdaq composite index recovered from an earlier loss and rose 10.67, or 0.42 percent, to 2,557.11.

Bonds rose as fixed-income investors reacted to the economic reports, with the yield on the benchmark 10-year Treasury note falling to 4.68 percent from 4.69 percent late Monday. The dollar was mixed against other major currencies, while gold prices advanced.

A barrel of light sweet crude declined 26 cents to $62.72 on the New York Mercantile Exchange. There remained looming concerns in the commodities market about refinery problems and uncertainties over whether U.S. gasoline inventories can meet summer driving demand.

Investors were awaiting the National Association of Home Builders housing market index, which was being released later in the session. It could show whether the housing sector is showing any signs of recovery.

On Wednesday, the Commerce Department will report housing starts and building permits that might provide more clues about the housing market. Builders broke ground on 1.52 million homes in March, and results for last month are expected to show a slight decline.

The reports come after a government report last week that indicated moderating inflation at the wholesale level. That data also lifted hopes that the Federal Reserve might not need to raise rates, and might consider a cut later this year.

Fed Chairman Ben Bernanke gave the market no new insights into his views on the economy and inflation. He addressed the growth of credit derivatives and other financial instruments during a speech before a financial markets conference in Georgia.

Home Depot, the nation's largest home improvement chain, posted lower quarterly profit as a sluggish U.S. housing market dented sales. Sales at stores open at least a year, an important measure of how retailers fared, slumped 7.6 percent.

Wal-Mart Stores, the world's largest retailer, missed Wall Street projections and warned second-quarter results might be disappointing. Last week, it reported April same-store sales were the weakest its history for April.

Shares of Wal-Mart fell 19 cents to $47.65, while Home Depot shed 89 cents, or 2.3 percent, to $38.12. Lowe's Cos., the second-largest home improvement chain, fell 23 cents to $30.76.

Sales figures reported by dozens of retailers last week raised concerns on Wall Street about consumer spending, which accounts for two-thirds of total economic activity.

Reuters Group PLC agreed Tuesday to a $17.2 billion takeover by Thomson that would vault the combined entity ahead of Bloomberg to become the world's largest financial data and news provider. Shares of Reuters rose $2.62, or 3.7 percent, to $74.24; Thomson fell 9 cents to $41.91.

Advancing issues outnumbered decliners by about 3 to 1 on the New York Stock Exchange, where volume came to 311.1 million shares.

The Russell 2000 index of smaller companies rose 4.42, or 0.54 percent, at 826.75.

Overseas, Japan's Nikkei stock average fell 0.93 percent. In afternoon trading, Britain's FTSE 100 was down 0.04 percent, Germany's DAX index rose 0.17 percent, and France's CAC-40 added 0.05 percent.