Dow Surges 106 Points in Broad Rally

Stocks rallied broadly Thursday, lifting the Dow index 106 points after a three-day skid, as a mild inflation report boosted hopes that interest rate hikes could end soon.

Gold finished above $500 an ounce as rising global demand fueled more buying of the metal and other commodities.

On Wall Street, the upswing marked the resumption of November’s powerful advance, which had driven the Dow Jones industrial average up 3.5% for the month amid generally upbeat reports on the economy.

Several broader indexes, including the New York Stock Exchange composite, hit record highs Thursday, a sign that investors were buying stocks in many industry sectors.

December’s trading opened with a bang after the Commerce Department reported that an inflation gauge closely watched by the Federal Reserve -- an index of core consumer prices -- rose only 0.1% in October.

Some took the report, which measures the cost of consumer goods and services excluding food and energy, as a sign that the Fed could soon end its credit-tightening campaign.

“The market perceives that if interest rates stop going up, then you could have a really violent rally,� said Jeff Auxier, manager of the Auxier Focus stock fund in Lake Oswego, Ore. “The inflation number came in real tame, and that encouraged people.�

Many bond investors, however, don’t seem convinced that the Fed is nearly done. Despite the inflation report Treasury bond yields rose Thursday, continuing their recent rebound.

The yield on the benchmark 10-year Treasury note ended at 4.52%, up from 4.49% on Wednesday, as some traders bet that interest rate hikes could continue at least through early 2006.

In part, yields rose as investors sold bonds to buy stocks, analysts said. Yields rise as bond prices fall.

Gold climbed $7.90 to $502.50 an ounce in New York trading, a 22-year high, as more investors worldwide sought the metal as an alternative to stocks, bonds and other assets.

The jump in gold prices probably reflects strong demand in Asia and elsewhere amid tighter supplies of the metal, said Chris Orndorff, head of equities at Los Angeles money manager Payden & Rygel. South Africa, the world’s biggest gold producer, said last month that its output had fallen 15% last quarter.

In active Wall Street trading, the Dow surged 106.70 points, or 1%, to 10,912.57, nearly recouping a slide of 125 points in the first three sessions of the week.

The broader Standard & Poor’s 500 index gained 15.19 points, or 1.2%, to 1,264.67; the technology-heavy Nasdaq composite zoomed 34.35 points, or 1.5%, to 2,267.17.

Gainers outnumbered losers by more than 3 to 1 on the New York Stock Exchange and by more than 2 to 1 on Nasdaq.

Market gauges hitting record highs included the NYSE composite, the S&P; mid-cap, the S&P; small-cap, the Russell 2,000 small-stock index and the OSX oil services index.

The Nasdaq composite closed at a new 4 1/2 -year high, but the S&P; 500 ended below its 4 1/2 -year high of 1,268.25 reached Nov. 25.

Orndorff said the session’s breadth was encouraging. “This was a good old-fashioned broad-based move,� he said.

New data Thursday continued to point to a resilient economy. The Commerce Department said personal spending rose 0.2% in October and personal income rose by 0.4%, both in line with expectations. Also, a report on U.S. factory activity showed that the sector continued to expand in November.

The calendar also is helping stocks, analysts say: December historically has been a winning month for the market, so some investors are climbing aboard in anticipation of more gains.

Still, another Fed rate increase looms: Policymakers meet Dec. 13, and most analysts expect the central bank’s key rate to rise to 4.25% from 4%. It would be the 13th increase since June 2004.

Among Thursday’s market highlights:

* McDonald’s helped boost the Dow, gaining $1.48 to a five-year high of $35.33 on strong sales expectations. Next week the chain is likely to report November gains of 4% to 5% from a year earlier, analysts said.

* Many industrial stocks rose on optimism about the economy. Alcoa was up 87 cents to $28.28 and Boeing surged $1.48 to $69.67. Caterpillar picked up $1.22 to $59.

* Crude oil jumped as colder weather descended on the East. Near-term oil futures in New York were up $1.15 to $58.47 a barrel. Energy stocks followed suit, with Valero Energy up $4.90 to $101.10, Sunoco up $3.49 to $80.69 and ConocoPhillips up $2.46 to $62.97.

* Chip-related stocks led the tech sector’s rally. Teradyne rose $1.16 to $15.79, National Semiconductor advanced $2.02 to $27.90 and LSI Logic gained 68 cents to $8.89.

* Commodity-related stocks, including gold miners, were broadly higher. AngloGold Ashanti surged $1.38 to $43.49, copper miner Phelps Dodge soared $6.86 to $142.53 and iron ore miner Cleveland-Cliffs rose $1.96 to $97.25.