Stocks advance as investors return to financials

NEW YORK — Wall Street moved sharply higher Thursday as investors took advantage of bargains in financial stocks after two straight days of heavy declines. The Dow Jones industrials rose more than 100 points.

Stocks initially fell after the Labor Department reported another hefty jump in consumer prices. The 0.8 percent overall rise in July's Consumer Price Index was not as large as June's increase, but it was twice as high as the market expected, and brings inflation to its highest annual pace in 17 years. The core index, which eliminates food and energy prices, is not up as much, but it still rose by 0.3 percent last month — slightly more than forecast.

Wall Street has been concerned that consumers are paring back their discretionary spending in the face of higher prices, in addition to falling home values and a chancy job market. And because consumers' spending accounts for more than two-thirds of the economy, the fear on Wall Street is that the nation is in for a prolonged period of slow or even no growth.

But after its early disappointment with the CPI, investors began looking more positively at stock prices that were beaten down the past two sessions amid rising anxiety about credit losses at banks and brokerages.

"The greater fear right now is missing the next big rally," said Richard Dickson, senior analyst at Lowry Research in Florida. "Inflation numbers were bad, but they are probably going to get better. The fact that the market has not sold off with any strength, investors are saying, 'Hey, let's go ahead and buy."'

The Dow jumped 102.67, or 0.89 percent, to 11,635.63 in late morning trading.

The Standard & Poor's 500 index rose 5.61, or 0.44 percent, to 1,291.44, and the Nasdaq composite index rose 18.62, or 0.77 percent, to 2,447.24.

Bonds edged higher after the Labor Department's data. The yield on the benchmark 10-year Treasury note, which moves opposite its price, dipped to 3.91 percent from 3.94 percent late Wednesday.

The dollar fell against other major currencies, while gold prices also fell.

Oil prices fluctuated, and had little discernible impact on stock trading. Light, sweet crude rose 0.04 cents to $116.04 a barrel on the New York Mercantile Exchange.