(Updates to midmorning)
* Core CPI eases inflation, rate hike worry
* Retreating oil prices add to the positive tone
* Banks, techs, big manufacturers advance
By Ellis Mnyandu
NEW YORK, June 13 (Reuters) - U.S. stocks rose on Friday,
helped by a government report that showed underlying price
pressures were muted in May, easing fears of inflation and a
near-term rise in interest rates.
Despite relentless rises in oil and food prices recently,
investors bet the latest inflation statistics would allow the
Fed to keep rates steady, nurturing an economic recovery and
improving the outlook for corporate profits.
Investors snapped up a broad range of stocks, but financial
shares were especially popular, including Goldman Sachs <GS.N>
up nearly 4 percent.
Lehman Brothers Holdings Inc <LEH.N> rose more than 9
percent, snapping a five-day losing streak, as investors looked
for cheap stocks while some short-sellers unwound their
positions.
The Labor Department said the Consumer Price Index rose at
its fastest in six months in May, propelled mainly by soaring
gasoline prices. But core CPI, which excludes volatile energy
and food costs, rose modestly and at a pace forecasters had
expected.
"There's just been such a buildup in oil prices and hawkish
talk from the Fed, that when that number printed today -- and
it was in-line on the core -- it really took the heat off the
interest rate markets and the Fed," said Jim Paulsen, chief
investment officer at Wells Capital Management in Minneapolis.
The Dow Jones industrial average <> rose 126.28 points,
or 1.04 percent, to 12,267.86. The Standard & Poor's 500 Index
<.SPX> climbed 15.48 points, or 1.16 percent, to 1,355.35. The
Nasdaq Composite Index <> gained 44.62 points, or 1.86
percent, to 2,448.97.
A $2.16 drop in the front-month U.S. crude oil price <CLc1>
to $134.60 added to the market's positive tone.
Goldman Sachs shares led financials on the S&P 500, rising
to $173.12 on the New York Stock Exchange. Shares of Lehman,
which shook up its management ranks on Thursday as it replaced
its chief financial officer and its chief operating officer,
rose to $24.80.
Technology shares rose after being beaten down in recent
days on fears of rate increases and weaker overseas sales.
Microsoft Corp <MSFT.O> was the biggest contributor to the
Nasdaq and the S&P 500, advancing more than 4 percent to
$29.26.
On Thursday, Microsoft ended talks to buy Yahoo Inc
<YHOO.O>, bringing relief to investors who saw the bid as a
risky move. []
Computer services company International Business Machines
Corp <IBM.N> rose more than 2 percent at $126.23 on the NYSE.
Among big manufacturers, shares of Caterpillar Inc <CAT.N>
climbed 1.9 percent to $81.96 on the NYSE, a day after the
company announced it would stop making diesel engines for the
North American commercial vehicle market after 2009.
The inflation data overshadowed a report that showed a
weaker-than-expected reading of consumer sentiment in a
Reuters/University of Michigan index.
(Additional reporting by Jennifer Coogan, Editing by Kenneth
Barry)
