US stocks up as dollar rises on optimism about economy

NEW YORK -- Wall Street advanced Thursday as investors looked past a disappointing profit report from Exxon Mobil Corp. and focused on the rising dollar, which strengthened on better-than expected economic data and the Federal Reserve's apparent resolve to monitor inflation.

Investors were relieved that the Commerce Department said Thursday that consumer spending rose 0.4 percent in March, a faster pace than predicted, and that the Institute for Supply Management said U.S. manufacturing contracted at a slightly slower pace than anticipated.

The data was not completely positive -- consumer spending rose mainly due to rising prices for energy and food. Stripping out inflation, spending edged up only 0.1 percent during the month. Meanwhile, the ISM's report also indicated that costs are continuing to rise. But the dollar rallied anyway, pushing the euro down more than 1 percent to $1.54 a day after the Federal Reserve cut the key interest rate by a quarter-point but suggested that inflation is a growing concern.

"What we're seeing is that maybe the economy is not falling off a cliff, but perhaps leveling off," said Peter Cardillo, chief market economist at New York-based brokerage house Avalon Partners Inc. "I think the Fed is over with, even though the Fed's statement didn't say that."

The Fed on Wednesday characterized itself as "staying on the fence," Cardillo said, but "there's a greater feeling out there that an economic recovery in the second half is on the way."

The stock market's advance was limited, though, as Exxon Mobil's $11 billion profit was not as high as analysts expected despite record-high oil prices during the first quarter. Lower production volumes caused the company's profit margins to shrink.

Investors are also awaiting the Labor Department's Friday report on April employment. On Thursday, the government said the number of newly laid off workers filing claims for unemployment benefits soared by a greater-than-expected 35,000 last week -- a negative sign ahead of the Friday report.

In late morning trading, the Dow Jones industrial average rose 49.83, or 0.39 percent, to 12,869.96.

Broader stock indicators also advanced. The Standard & Poor's 500 index rose 3.90, or 0.28 percent, to 1,389.49, and the Nasdaq composite index rose 24.12, or 1.00 percent, to 2,436.92.

Exxon Mobil, one of the 30 Dow components, saw its shares decline $4.28, or 4.6 percent, to $88.78, after releasing its disappointing earnings report. The report also caused rival Chevron Corp.'s stock to fall $1.98, or 2 percent, to $94.17, ahead of its own profit report Friday.

Bond prices rose. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.69 percent from 3.73 percent late Wednesday.

As the dollar moved higher against other currencies, gold prices dropped and light, sweet crude oil futures fell $2.20 to $111.26 a barrel on the New York Mercantile Exchange. Crude oil had recently been trading at records near $120 a barrel.

The Russell 2000 index of smaller companies rose 5.85, or 0.82 percent, to 722.03.

Advancing issues outnumbered decliners by about 9 to 5 on the New York Stock Exchange, where volume came to 409.4 million shares.

Overseas, Japan's Nikkei stock average fell 0.60 percent. European markets were closed for a holiday.

(Agencies)