NEW YORK -- Stocks closed modestly higher yesterday as weaker oil and gold prices led investors to expect today's consumer price report will confirm inflation is under control, traders and analysts said.
Eastman Kodak Co. accounted for more than half of the 9.68-point gain that carried the Dow Jones industrial average to 3,514.69, its second straight rise. The average rose as high as pTC 3,518.85 yesterday morning as Kodak, drug and oil shares rallied.
Broader market measures also were higher. The Standard & Poor's 500-Stock Index was 0.45 points higher at 447.71 after rising 1.88 Friday, the NASDAQ Combined Composite Index was up 3.13 points at 696.32 after Friday's 5.14 surge, and the American Stock Exchange Market Value Index added 0.88, to 435.20.
After gaining 7/8 of a point Friday, benchmark 30-year U.S. Treasury bond securities dipped 5/32 point, or $1.25 per $1,000 in face amount, while their yield rose to 6.82 percent from 6.81 percent.
"The market thinks the inflation bogyman has been quieted down," said Robert Stovall, president of Stovall/Twenty-First Advisors. "He's not dead, but he's hiding.
"The general bias is to buy," said Mr. Stovall, who thinks investorshave plenty of cash to draw on. The Dow Jones industrials could be poised for a summer rally that might carry the index above 3,700 after Congress recesses, he said.
"The market's thinking nothing bad is going to happen and the recovery will continue," he said.
Lower commodity prices yesterday backed the view that inflation wasn't an immediate concern. Crude oil prices fell 9 cents, to $18.89 a barrel, while gold slumped 90 cents, to $366.60. The Commodity Research Bureau rose a slight 0.1, to 203.39, after sliding 1.89 on Friday.
Lingering optimism generated by Friday's producer price report created confidence the Federal Reserve Board won't move quickly to raise interest rates, said Ronald Doran, director of institutional trading at C.L. King & Associates. The report suggested "we're not going to get a change on rates," Mr. Doran said.
On Friday, the Labor Department said producer prices were unchanged in May, easing concern that the Fed will raise short-term interest rates to curb inflation.
Economists surveyed by Bloomberg Business News project the Consumer Price Index, to be reported this morning, rose 0.2 percent inMay, and 0.3 percent excluding food and energy. Until the report is released, "I think the market will tread water," said John Blair, head of trading at NatWest Securities.
The Dow Jones industrials got a big boost from Kodak, up $2.625 at $53.75 as Dean Witter Reynolds analyst Eugene Glazer raised his rating to "buy" from "hold."
Investors speculated that Kodak would announce a major corporate restructuring today, traders said. Kodak Chairman Kay Whitmore is scheduled to address a meeting of analysts this morning in New York, to be followed by a media briefing.
Computer-driven orders to buy stocks also gave prices a lift late in yesterday's session, according to Phil Smyth, analyst at Birinyi Associates.
Drug stocks helped lead the upward move as investors anticipated further delays in the Clinton Administration's promised health care reforms. Merck rose 37.5 cents to $39, Pfizer was ahead $1.50 to $72.375, and Eli Lilly gained 87.5 cents to $50.75.
Oil stocks rose slightly after sharp declines on Friday sparked by the failure of an Organization of Petroleum Exporting Countries meeting to agree on production quotas.
Exxon added 12.5 cents to $65.375, Mobil gained 50 cents to $71.75 and Amerada-Hess rose 75 cents to $50.375.