Stocks mostly higher on signs of economic growth

Associated Press Modified: August 15, 2012 at 4:00 pm •  Published: August 15, 2012
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NEW YORK (AP) — Signs that the U.S. economic recovery is advancing, albeit slowly, sent stocks bouncing up and down in narrow ranges for much of the day Wednesday.

The Dow Jones industrial average closed with a loss of 7.36 points at 13,164.78. The broader Standard & Poor's 500 index was up 1.60 points at 1,405.53 and the Nasdaq composite rose 13.95 points to 3,030.93.

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 reports have suggested that the economy improved somewhat in July. Employers created the most jobs in five months, while consumers spent a little more at stores after three months of declines.

Many investors wonder if the economy is fragile enough to create the sense of urgency for policy makers to act proactively. The slightly better outlook for the economy could prompt the Fed to hold off on taking action when its policy committee next meets in September.

"We're in a period of very slow growth, though interest rates are low, and very little inflation," said David Kotok, chief investment officer at Cumberland Advisors. "Unless the U.S. economy goes into a swoon and there is no pick up in retail sales and deterioration in jobs growth or major shocks from Europe and China, the Fed will not take any action for now."

The bond market is betting that the Fed is not likely to act. Investors have been selling low-risk U.S. government bonds, sending the yield on the benchmark 10-year Treasury note up to 1.81 percent Wednesday. That's up from 1.73 percent Tuesday and 1.66 percent late Monday.



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