Wall Street closed an erratic session moderately higher Tuesday after investors sorted through a mixed batch of data that included a rebound in New York manufacturing, signs of rising inflation and uneven first-quarter earnings. The market also had its eye on the rising price of crude oil.
Following a spate of disappointing readings on the economy, investors were pleased that the New York Federal Reserve reported regional manufacturing expanded modestly in April, after shrinking at a record clip in March. The market had expected another contraction.
And in a positive sign for earnings, health care products maker Johnson & Johnson said its first-quarter profit jumped 40 percent on rising sales and declining costs. Results from the maker of consumer staples ranging from baby shampoo to pharmaceuticals came as a relief to investors, who have been unimpressed by most first-quarter earnings so far.
Still, the market remains anxious about inflation. As crude oil prices surged to a record $114 a barrel, and retail gasoline and diesel prices reached new highs, the Labor Department’s Producer Price Index registered a much higher-than-anticipated 1.1 percent rise for March. The core index, which strips out food and energy prices, rose by 0.2 percent, as expected.
Core producer price increases have slowed over the past three months, so most investors are not too worried that inflation will keep the Federal Reserve from lowering interest rates again if the economy weakens further. However, food and energy prices keep soaring, so consumers have been paring back their discretionary spending to afford necessities — and that is hurting some corporate profits.
“My guess is people are still really concerned about the inflation impact down the road. If oil stays where it is, it’s going to be a problem,” said Philip S. Dow, managing director of equity strategy at RBC Dain Rauscher in Minneapolis.
According to preliminary calculations, the Dow Jones industrial average closed up 60.41, or 0.49 percent, at 12,362.47.
Broader stock indicators also advanced. The Standard & Poor’s 500 index rose 6.11, or 0.46 percent, to 1,334.43, while the Nasdaq composite index added 10.22, or 0.45 percent, to 2,286.04.
Bond prices fell in response to the inflation and manufacturing news. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.57 percent from 3.51 percent late Monday.
High oil prices are one reason Wall Street is pessimistic about the airline industry. Delta Air Lines Inc.’s and Northwest Airlines Corp.’s combination to create the world’s largest carrier weighed on the stock market Tuesday, with investors uneasy about the all-stock deal. Delta fell $1.46, or 14 percent, to $9.02, while Northwest fell $1.121, or 10 percent, to $10.10.
Johnson & Johnson slipped 9 cents to $65.65, but the company’s earnings were a refreshing surprise for the market, RBC’s Dow said. And despite everything that has happened this year with the global financial system and the economy, he added, the stock market has not fallen a full 20 percent from its highs last year, the traditional indication of a bear market.
“There’s no shortage of things to worry about, but it seems to me that most people in equities have thought about selling or have sold. There’s a much larger population that’s sold than not,” Dow said. “It’s a time when if you’re willing to be patient, there are some pretty attractive valuations right now.”
Banks are looking particularly cheap. On Tuesday, a mild recovery in financial stocks, including Citigroup Inc. and JPMorgan Chase & Co., after a string of down days for the banks, helped lift the broader stock market.
“Financials have stabilized today, which is a good thing,” said Todd Leone, managing director of equity trading at Cowen & Co. “They’ve been backing and filling. I wouldn’t say the worst is over with these stocks, but I think they’ve become more transparent.”
JPMorgan releases its first-quarter results on Wednesday, Citigroup reports Friday, and Bank of America Corp. reports next week. JPMorgan rose 62 cents to $42.12; Citi added 29 cents to $22.80; and BofA ended unchanged at $35.58.
Overall, Tuesday’s trading was fairly quiet, with investors cautious about making big bets ahead of earnings later this week and next.
“There’s no real prevailing theme to the market right now,” Leone said. “They’re waiting for a whole slew of earnings.”
Gold prices rose, while the dollar fell against other major currencies.
The Russell 2000 index of smaller companies rose 5.99, or 0.87 percent, to 692.06.
Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange, where volume came to a light 1.2 billion shares.
Overseas, Japan’s Nikkei stock average rose 0.77 percent. Britain’s FTSE 100 rose 1.29 percent, Germany’s DAX index rose 0.47 percent, and France’s CAC-40 rose 0.30 percent.