Stocks Finish Higher

A tame reading on consumer prices eased inflation fears. Next week, investors get the Fed's Beige Book and a heavy dose of earnings reports

Stocks rallied on Friday as a tame reading on consumer prices calmed inflation concerns. Gains also likely reflected bargain hunting after recent weakness, says Standard & Poor's MarketScope.

The Dow Jones industrial average rose 70.75 points, or 0.69%, to 10,287.34. The broader Standard & Poor's 500 index was up 9.73 points, or 0.83%, to 1,186.57. The tech-heavy Nasdaq composite index gained 17.61 points, or 0.86%, to 2,064.83.

In the energy markets, crude oil fell 45 cents to $62.63 a barrel. Waning demand had been the story behind recent price weakness, though sources saw considerable short covering into the weekend, says Action Economics.

Among economic reports to watch next week, the Federal Reserve will release its Beige Book for the Nov. 1 policy meeting on Wednesday. The market will also get comments from various Fed members, including Chairman Alan Greenspan, throughout the week.

Other data releases include the Empire State manufacturing survey on Monday, the producer price index on Tuesday, housing starts on Wednesday, and leading indicators on Thursday.

The earnings calendar is very heavy next week, and includes major companies such as General Motors (GM ), 3M (MMM ), Intel (INTC ), Johnson & Johnson (JNJ ), Yahoo (YHOO ), Coca-Cola (KO ), Pfizer (PFE ), Ford (F ), and McDonald's (MCD ), just to name a few.

There were a bunch of major economic reports out Friday. The consumer price index (CPI) surged 1.2% overall and was up only 0.1% on the core in September after gains of 0.5% and 0.1%, respectively in August. On a year-over-year basis, the CPI accelerated to a 4.7% pace from 3.6%. But the core decelerated to a 2.0% pace from 2.1%. As expected energy prices boosted the index, rising 12.0%. Gas prices were up 17.9%.

"The mix of data with the softer core should foster a rebound in Treasuries," says Action Economics.

U.S. retail sales edged up 0.2% in September, after a revised 1.9% drop in August. Excluding autos, sales surged 1.1%, from a 1.0% increase in August. Vehicle sales fell another 2.8% after a revised 11.2% plunge in August (12% previously). The ex-auto gain was much stronger than expected, albeit impacted by gas, says Action Economics.

The preliminary reading for October University of Michigan consumer sentiment fell to 75.4 from 76.9 in September. "The Michigan Sentiment data revealed dramatic declines, though it remains hard to read anything into survey responses given the reactions the public are having to the effects of Katrina," says Action Economics.

Among stocks in the news, trading firm Refco (RFX ) announced Friday that it has started unwinding proprietary and client positions at its core business, Refco Securities. The New York Stock Exchange halted trading in the stock indefinately. The scandal at the largest independent futures-brokerage firm in the U.S. began Monday when the company put Chief Executive Phillip Bennett on indefinite leave after discovering that a firm he controlled owed Refco $430 million. Bennett was arrested Tuesday night and charged with fraud in connection with the company's IPO.

On the STARS, General Electric (GE ) posted third-quarter earnings per share of 44 cents, vs. 38 cents a year ago, on a 9.4% revenue rise. The conglomerate sees 56-58 cents fourth-quarter EPS. It raised the lower end of 2005 EPS guidance from $1.80 to $1.81, for a full year outlook range of $1.81-$1.83.

Treasury Market

Tame core CPI in September set up the bond market for a bungee jump in yields, first down and then back up again by the close, says Action Economics. The benchmark 10-year yield rose to 4.49% after rebounding from lows of 4.43%, says Action Economics.

Rounds of data, including a small rise retail sales (ex-auto gained 1.1%), a plunge in industrial production, and lingering weakness in October Michigan sentiment by and large should have encouraged bulls, says Action Economics. But bears focused in on hawkish remarks from the Federal Reserve's Hoenig late Thursday and noted that inflation expectations were on the rise in the fine print of the Michigan survey, says Action Economics.

World Markets

European stock markets finished higher on Friday. London's Financial Times-Stock Exchange 100 index was up 9.8 points, or 0.19%, at 5,275.

Germany's DAX index gained 25.49 points, or 0.51%, to 4,975.56. In Paris, the CAC 40 index rose 12 points, or 0.27%, to 4,482.13.

Asian markets finished lower on Friday. In Japan, the Nikkei 225 index fell 53.97 points, or 0.4%, to 13,420.54. Banking and industrial stocks such as steel manufacturers led the market lower, says Standard & Poor's MarketScope.

In Hong Kong, the Hang Seng index sank 135.95 points, or 0.93%, to 14,485.88, amid liquidation ahead of the weekend and inflation data in the U.S.

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