NEW YORK - Stocks rose for a second straight session Tuesday as a drop in consumer prices allowed investors to put aside worries about inflation, at least for the short term.
With gasoline prices falling to eight-month lows, the Consumer Price Index registered a small drop in July, giving consumers a respite from soaring energy prices. With consumer spending one of the main drivers of the economy, the news cheered investors who have been concerned that higher oil prices could spur inflation.
However, Russian oil giant Yukos' continuing tax problems sent oil futures higher in late morning trading, taking stocks off their session highs. A barrel of light crude was quoted at $46.73, up 68 cents, on the New York Mercantile Exchange. Oil had been below the $46 mark earlier.
In midafternoon trading, the Dow Jones industrial average was up 8.99, or 0.1 percent, at 9,963.54. The Dow had pushed past the 10,000 mark earlier in the session; the last time the Dow closed above 10,000 was Aug. 4.
Broader stock indicators were moderately higher. The Standard & Poor's 500 index was up 2.31, or 0.2 percent, at 1,081.65, and the Nasdaq composite index gained 14.83, or 0.8 percent, to 1,797.67.
According to the Labor Department, the CPI fell 0.1 percent in July, the first drop in prices since November and a large shift from the price gains in May and June. Without food and energy costs factored in, the CPI rose 0.1 percent, less than Wall Street had forecast.
Housing construction also saw better-than-expected gains, with the Commerce Department reporting an 8.3 percent rise in home and apartment construction in July, more than making up for the 7.7 percent drop in June.
The economic data reaffirmed that, despite soaring energy costs, the overall economy remained sound and that inflation, at least for now, has been kept at bay.
And if oil prices fall from their current record highs, stocks will be poised to make strong gains, analysts said.
"In the short term, there's enough good news in the economic data to offset oil prices, at least for now," said Chris Wolfe, global head of equities for J.P. Morgan Private Bank. "Certainly, we can't see how these oil prices will be sustainable in the long term. We're ready for a relief rally once the prices start coming down."
A number of earnings reports from retailers also gave investors a boost. Dow component Home Depot Inc. surged $1.23 to $35.21 after the home improvement retailer reported record sales and a 19 percent increase in second-quarter profits. Home Depot beat Wall Street expectations by 7 cents per share and raised its guidance for future quarters.
Office supply chain Staples Inc. saw its profits rise 39 percent in the quarter, beating expectations by 2 cents per share. Staples, which also announced new ventures in Europe and China, gained $1.36 to $29.24.
Consumer wholesaler B.J.'s Wholesale Club Inc. was up $1.39 at $24.78 after reporting a strong 25 percent rise in second-quarter earnings. The company beat estimates by 5 cents per share.