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The Honolulu Advertiser

Updated at 5:27 a.m., Tuesday, April 17, 2007

Dow Jones industrials near record territory

Associated Press

NEW YORK — Wall Street advanced today, pushing the Dow Jones industrials toward record territory after a rise in home construction and a mild reading on consumer inflation encouraged investors to buy.

Investors appeared heartened by the Commerce Department's report that housing starts for March rose 0.8 percent, a feeble rise compared with February's 7.6 percent advance, but much better than the drop investors expected. Building permits also rose. The stock market has experienced several tumultuous weeks this year due to worries about the financial troubles of the subprime lending sector spilling into the already sluggish housing market.

Giving investors some additional relief, the Labor Department reported that its core consumer price index rose 0.1 percent in March, less than expected, and alleviating some anxiety about the Federal Reserve's need to raising interest rates to curb rising costs. The overall consumer price index, which takes into account energy and food costs, rose 0.6 percent in March — the largest increase in 11 months — and was in line with expectations.

"We believe the Fed's on hold for quite a while," said Joe Balestrino, a portfolio manager at Federated Investors Inc. The central bank has kept rates steady since last summer, after about two years of gradual increases.

In late morning trading, the Dow rose 56.07, or 0.44 percent, to 12,776.53. The blue chip index has risen 12 out of the last 13 sessions. The increase put the Dow about 10 points below its record close of 12,786.64, which occurred Feb. 20.

Broader stock indicators also rose. The Standard & Poor's 500 index rose 4.32, or 0.29 percent, to 1,472.79, and the Nasdaq composite index rose 0.96, or 0.04 percent, to 2,519.29.

Stocks initially wobbled after the Federal Reserve reported in March that utility production dropped by 7 percent, offsetting a rise in factory production.

Bonds rose after the economic data was released, with the yield on the benchmark 10-year Treasury note falling to 4.70 percent from 4.74 percent.

Gold prices slipped. The dollar neared all-time lows versus the euro, and dropped to a 15-year low against the British pound. The dollar's weakness has been somewhat anticipated, given that the U.S. economy and interest rates have been rising less than in other countries.

But the stock market has been exhibiting optimism going into the first-quarter earnings season. Nearly half the component companies of the Dow Jones industrial average release earnings this week. Analysts expect the reports to show corporate growth is slowing, but so far this week, many companies' financial results have surpassed forecasts.

Early Tuesday, the Coca-Cola Co., the world's largest beverage maker and one of the 30 Dow components, said its first-quarter profit jumped 14 percent. The rise beat analyst expectations, thanks to a double-digit increase in worldwide sales despite its troubled North America segment. Coca Cola rose $1.32, or 2.6 percent, to $51.59.

U.S. corporations who play their cards right can benefit from markets abroad, despite slowing U.S. growth, market watchers say.

"The foreign economies are now large enough and strong enough that they'll be able to help us," Balestrino said.

Another Dow component, health care products maker Johnson & Johnson, reported a profit drop of 22 percent due to a charge for an acquisition that more than offset record sales. But the results beat forecasts and the company rose $1.70, or 2.7 percent, to $64.72.

Meanwhile, the financial sector posted mixed earnings. Mellon Financial Corp.'s profits rose and exceeded expectations, as did those of Wells Fargo & Co. But TD Ameritrade Holding Corp.'s profits dropped and missed predictions, and so did U.S. Bancorp's. Mellon rose 38 cents to $44.52; Wells Fargo advanced 17 cents to $35.68; TD Ameritrade fell $1.19, or 7.1 percent, to $15.68; and U.S. Bancorp slipped 11 cents to $34.79.

Investors will also be watching for first-quarter results from various companies, notably technology heavyweights Intel Corp. and International Business Machines Corp., which are due to report results after the closing bell. Intel rose 19 cents to $20.89, while IBM advanced 94 cents to $97.12.

Crude oil prices advanced by 65 cents to $64.26 a barrel on the New York Mercantile Exchange.

Overseas, Japan's Nikkei stock average fell 0.57 percent. In afternoon trading, Britain's FTSE 100 was down 0.19 percent, Germany's DAX index was up 0.33 percent, and France's CAC-40 was up 0.01 percent.

Advancing issues outnumbered decliners by about 4 to 3 on the New York Stock Exchange, where volume came to 501.6 million shares.

The Russell 2000 index of smaller companies slipped 0.68, or 0.08 percent, to 830.76.

Overseas, Japan's Nikkei stock average closed down 0.57 percent. In afternoon trading, Britain's FTSE 100 fell 0.36 percent, Germany's DAX index rose 0.13 percent, and France's CAC-40 fell 0.21 percent.