Stocks Bounce Back As Inflation Worries Fade

Stocks bounced back Thursday as the previous day’s pangs about inflation and interest rates vanished almost as quickly as they appeared.

The Dow Jones industrial average rose 50.97 to 7,136.62, led by a big gain from IBM. During the afternoon, the Dow was up almost 130 points, nearly erasing Wednesday’s 140-point plunge.

Broader stock indicators also pulled back before the close, but still managed to wipe out a sizable portion of Wednesday’s losses.

Stocks opened the day lower, threatening to extend Wednesday’s sell-off, as long-term interest rates nearly pushed back above 7 percent in the bond market before easing lower. Last week, those rates fell below that psychologically pivotal level for the first time in a month, fueling a broad rally in the stock market.

“The lift in confidence that was evident last week continues,” said Eric Miller, chief strategist at Donaldson, Lufkin & Jenrette Securities in San Francisco.

Advancing issues outnumbered decliners by a 9-to-7 margin on the New York Stock Exchange, where volume totaled 534.12 million shares as of 4 p.m., up from Wednesday’s pace.

Some of the stocks that moved substantially or traded heavily Thursday:

NYSE

IBM, up 5-1/4 at 167-3/8.

The stock benefited from an upbeat reaction to Wednesday’s meeting between securities analysts and IBM Chairman Louis Gerstner. On Thursday, Credit Suisse First Boston raised its 12-month target price for IBM to 195 from 165, the Dow Jones News Service reported.

Wal-Mart, up 1 at 29-1/4.

The nation’s largest retailer reported that sales from stores open at least a year rose 6.1 percent in April compared with a year ago, while total sales rose 11.7 percent.

US Airways, up 2-3/4 at 34-1/2.

The airline announced plans to drop some unprofitable routes, halt jet service to nine airports and consolidate some maintenance and reservations operations in a corporate cost-cutting move.

NASDAQ

PetsMart, down 13/16 at 10-13/16.

The pet supplies retailer cautioned that its first-quarter operating profit will be below expectations.

Premier Laser, up 2-5/8 at 11.

The FDA approved Premier’s painless laser drill for teeth. The device spares patients most of the pain of dental work because it does not vibrate like a conventional drill.

Noodle Kidoodle, up 5/8 at 3-3/8.

The children’s retailer reported that its first-quarter sales rose 18 percent at stores open at least a year. Noodle Kidoodle said its overall sales in the first quarter ended May 3 totaled $15.5 million, up 89 percent from year-ago levels.