Stocks Rise On More Signs of Economic Growth

by Pallavi Gogoi
Wednesday Aug 15, 2012
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NEW YORK (AP) - Stocks are edging higher on Wall Street following more signs that the U.S. economic recovery is advancing, albeit at a slow pace.

The Dow Jones industrial average rose 15 points to 13,188 a half-hour after the opening bell Wednesday. The broader S&P 500 index rose two points to 1,406, while Nasdaq rose nine points to 3,025.

U.S. industrial production increased last month as factories made more cars, computers and airplanes, according to the Federal Reserve.

It was a sign that manufacturing is recovering after a weak spring. Also, consumer prices were unchanged in July from June, as a small drop in energy costs offset slightly higher food prices. The consumer price index hasn’t changed since March, which means that inflation is in check.

Lower inflation gives the Federal Reserve more leeway to launch new programs intended to rekindle the economy. The Fed signaled at a meeting in late July that it is ready to act if growth and hiring stays weak.

Recent signs point to some economic improvement in July. Employers added the most jobs in five months, while consumers increased their retail spending after three months of declines.

Though they were better, the economic data showed a very weak recovery and that the U.S. economy is just trudging along.

It’s left many investors wondering if the economy is fragile enough to create a sense of urgency among fiscal policy makers to act proactively. This slightly better outlook for the economy could prompt the Fed to hold off on taking action when its policy committee next meets in September.

In the last few weeks of the summer, trading volumes in the stock market have been low. Investors may also be holding off on taking aggressive positions ahead of a meeting of the U.S. Federal Reserve in Wyoming at the end of this month.

U.S. earnings were mixed.

Target rose 92 cents to $64.30 after the retailer increased its profit outlook for the year. Target is preparing its first expansion out of the U.S., into Canada.

Deere plummeted $5.11 to $75.02 after the agriculture machinery maker reported results that were well below Wall Street’s expectations. The company attributed its poor results to a slowing global economy and the effects of a prolonged U.S. drought. Deere also cut its revenue forecast for the year.

Staples dropped $2 to $11.46 after the office and school supplies store said its income dropped 32 percent following weak sales in North America and Europe. The results fell short of analysts’ expectations and the company cut its full-year earnings forecast.

Abercrombie & Fitch struggled to sell its preppy jeans and T-shirts in the previous quarter, but its results weren’t as bad as analysts had forecast. The teen fashion leader also laid out plans for updating its fashions. The stock soared 10 percent, or $3.15, to $35.48.

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