Wall Street finishes with sharp gains

Source: Agencies  |   2008-6-14  |     ONLINE EDITION

WALL Street ended a turbulent week with a sharp gain yesterday after government readings on inflation and a drop in oil prices eased worries about the effect of rising prices on consumers. The advance lifted the Dow Jones industrial average more than 165 points, and the three major indexes turned in a mixed performance for the week.

Short-term Treasury prices rose after being pounded earlier this week on fears that the Federal Reserve would be forced to raise interest rates to combat inflation.

The readings arriving yesterday and gains in the dollar supported a notion that the Fed will be able to walk a middle line as it seeks to balance the well-being of the economy with pressures from rising prices. Recent drops in the dollar had contributed to higher oil prices because a weaker greenback makes each barrel more expensive.

"The news today tells us that it's not getting worse," said Linda Duessel, equity market strategist at Federated Investors. She said that while investors aren't necessarily seeing improvement in areas like inflation, they appear relieved that prices aren't running out of control and forcing the Fed to hike rates and risk sending the economy into a steep downturn.

"I think market watchers are hoping and expecting that we don't need another rate cut," she said.

The government's report that prices are rising came as no surprise to investors or consumers. The Labor Department's Consumer Price Index grew 0.6 percent last month, which was just above the 0.5 percent economists had expected. The core inflation reading, which excludes often volatile food and energy prices, edged up a more moderate 0.2 percent, as expected.