Stocks show slight gains

• Hawai'i Stocks
• Updated Market Chart

By Hope Yen
Associated Press

NEW YORK — Wall Street managed slight gains on reports of modest economic improvement today as investors battled a temptation to cash in profits from yesterday's rally.

Analysts said a report showing a rise in consumer prices worried some investors who were counting on the Federal Reserve to cut interest rates by a half-point. But mostly, investors were being cautious after three months of advances.

"I think the CPI number took some people by surprise; it maybe has the market thinking the Fed might be a little less aggressive at the end of the month," said Dennis Ferro, chief investment officer of Evergreen Investments.

"The market has run a long way and was due for a pause," he added. "I think the market is at a point where all the hopes for the second half of the year in economic growth and earnings improvement now need to be validated."

The Dow Jones industrial average closed up 4.06, or 0.04 percent, at 9,323.02, having gained 201 points yesterday to its highest level since July 2002.

The broader market also edged higher. The Nasdaq composite index rose 1.98, or 0.1 percent, to 1,668.56. The Standard & Poor's 500 index inched up 0.95, or 0.1 percent, to 1,011.69.

The Federal Reserve said production at the nation's factories and utilities edged up by 0.1 percent in May after declining in both March and April. It was the first gain in industrial output since February.

The Commerce Department said housing construction increased by 6.1 percent in May from the previous month to a seasonally adjusted annual rate of 1.73 million new units, indicating continued strength in the housing sector.

And the Labor Department said its Consumer Price Index, a barometer of inflation, was unchanged in May, an improvement from April's 0.3 percent decline. The reading allayed fears of possible deflation, although it stirred concern among those expecting an interest rate cut; economists had predicted the CPI would dip by 0.1 percent.

"There was no convincing data on the economic side," said Chris Wolfe, equity market strategist for J.P. Morgan Private Bank. "Industrial production was trendless versus the previous month."

Wolfe said many investors were holding off on making major stock purchases as the second-quarter earnings season approaches. "At the end of the day, it's hard to fathom the trend is anything than a circling pattern around second-quarter earnings," he said.

Ferro agreed. "If we come through the next 3-4 weeks with a reasonable earnings reporting period, that will set the stage for the market to move higher," he said.

Circuit City gained 92 cents, or 13.4 percent, to $7.79 after the electronics retailer posted a quarterly loss that was narrower than expectations.

Microsoft rose 57 cents to $25.96 after West Virginia settled its antitrust claims against the software company; Lehman Brothers also said the company's stock might be overdue for a rally, citing good valuation.

Pfizer advanced $1.58 to $36.18.