updated 1/12/2006 9:47:16 AM ET 2006-01-12T14:47:16

Stocks resumed their advance Wednesday after New York’s Federal Reserve president said in a speech that core inflation is “quite moderate.” All three major indexes reached multiyear highs for the second time this week.

Major Market Indices

Since fighting inflation is the U.S. Federal Reserve’s top concern, investors interpreted the remarks by New York Fed President Timothy Geithner as another sign that the Fed might soon halt its year-plus streak of short-term interest rate hikes.

“Anything that makes investors feel comfortable with the inflation level and the way short-term interest rates are going is going to help the market,” said Stuart Freeman, chief equity strategist for A.G. Edwards & Sons.

Earlier in the session, stocks were pressured by a profit warning from DuPont Co. and BP PLC’s announcement that its fourth-quarter oil production slipped. DuPont is the second of the 30 Dow industrials to disappoint Wall Street after Alcoa Inc. kicked off fourth-quarter earnings season Tuesday with lower-than-expected profits.

The Dow Jones industrial average finished the day up 31.86 points, or 0.29 percent, while the broader Standard & Poor’s 500-stock index rose 4.49 points, or 0.35 percent. The Nasdaq composite index added 11.04 points, or 0.48 percent.

Bonds fell after a weak auction of five-year Treasury bills. The yield on the 10-year Treasury rose to 4.46 percent from 4.43 percent Wednesday. The U.S. dollar fell against other major currencies. Gold prices were higher.

Crude oil futures rose. A barrel of light crude was quoted at $63.94, up 57 cents, in trading on the New York Mercantile Exchange.

Wall Street saw strong advances in the first five trading days of the year, but after the Dow Jones industrial average crossed 11,000 Monday for the first time in more than four years, stocks paused, closing nearly flat Tuesday.

Stocks remained in their torpor Wednesday until Geithner’s speech, in which he said overall inflation pressures have risen, while “inflation excluding food and energy, however, has been quite moderate, in part due to very modest growth in unit labor costs.”

The market reacted because the speech contained “no overtly hawkish sign and some positive words on current inflation and productivity trends,” said Lynn Reaser, chief economist, the investment strategies group, at Bank of America.

Said Freeman, “A comment like this suggests that perhaps future increases won’t be too aggressive.”

In company news, the chemical maker DuPont fell $1.41 to $41.14 after it said its fourth-quarter earnings will be about 10 cents per share for the period, far beneath its October guidance of 20 cents to 25 cents per share. DuPont said results were hurt by suspended operations and logistical problems from hurricanes Katrina and Rita in the Gulf Coast, along with separate production interruptions at plants in Brazil, the Netherlands and the United States.

BP, one of the world’s largest oil companies, fell 28 cents to $67.90 after it said its oil production for the fourth quarter of 2005 would be slightly lower than the same period last year due to the hurricanes. BP also disclosed more than $1.3 billion of charges on its refining and distribution businesses.

Guidant Corp. rose $1.05 to $70.44 as the company’s board wrestled over whether to accept Boston Scientific Corp.’s $25 billion bid for the company. Competing suitor Johnson & Johnson made an 11th-hour effort to negotiate a new deal, according to news reports. Boston Scientific fell $1.07 to $25.41; J&J fell 60 cents to $62.50.

Overseas, Japan’s Nikkei stock average rose 1.48 percent. Britain’s FTSE 100 rose 0.75 percent, Germany’s DAX index gained 0.69 percent, and France’s CAC-40 added 0.59 percent.

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