(Updates to afternoon, changes byline)
* Core CPI, retreating oil ease inflation hike worry
* Tech shares climb back from recent losses
* Short covering lifts Lehman shares
By Jennifer Coogan
NEW YORK, June 13 (Reuters) - U.S. stocks rose on Friday,
helped by a government report that showed underlying price
pressures rose moderately in May, easing fears that inflation
would force a near-term rise in interest rates.
Shares of Lehman Brothers Holdings Inc <LEH.N> jumped 13.5
percent, snapping a five-day losing streak, as some
short-sellers unwound their positions ahead of the weekend.
Despite relentless gains in oil and food prices recently,
investors bet the latest inflation statistics would let the
Fed keep rates steady, helping the economy recover and
improving the outlook for corporate profits.
The Labor Department said the Consumer Price Index rose at
its fastest pace in six months in May, with the "headline"
measure including runaway gasoline prices up 0.6 percent. But
core CPI, which excludes volatile energy and food costs, rose
0.2 percent, matching expectations.
"There was concern earlier in the week that CPI would be
out of range, but it came in within expectations and that was
a relief. We saw the market respond favorably," said Bucky
Hellwig, senior vice president at Morgan Asset Management, in
Birmingham, Alabama.
The Dow Jones industrial average <> was up 104.13
points, or 0.86 percent, at 12,245.71. The Standard & Poor's
500 Index <.SPX> was up 12.39 points, or 0.92 percent, at
1,352.26. The Nasdaq Composite Index <> was up 35.83
points, or 1.49 percent, at 2,440.18.
The S&P and the Nasdaq are set to end the week lower,
while the Dow is barely changed.
Technology shares rose after being beaten down in recent
days on fears of rate increases and weaker overseas sales.
Microsoft Corp <MSFT.O> was a big contributor to the gains
in both the Nasdaq and the S&P 500, advancing 2.6 percent to
$28.95.
On Thursday, Microsoft ended talks to buy Yahoo Inc
<YHOO.O>, bringing relief to investors who saw the bid as a
risky move. []. Yahoo, however, agreed to an ad
partnership with Microsoft's rival Google Inc <GOOG.O>.
Shares of Google were up 3.2 percent at $570.79 on the
Nasdaq. Analysts at Sanford C. Bernstein lifted their price
target on both Yahoo and Google shares.
Yahoo fell 4.4 percent to $22.48 on the Nasdaq.
U.S. crude oil for July delivery <CLc1> settled at
$134.86 a barrel, down $1.88, which added to the market's
positive tone.
Lehman Brothers, which shook up its management ranks on
Thursday as it replaced its chief financial officer and its
chief operating officer, rose $3.06 to $25.76. Analysts said
some investors who took short positions, betting on a fall in
Lehman's stock, were probably closing out their positions
after the stock's recent decline.
Among big manufacturers, shares of Caterpillar Inc <CAT.N>
climbed 1.4 percent to $81.60 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, which hit a 28-year low
in June.
(Editing by Jan Paschal)
