Stocks rise again on economic data

Stocks rose again today as a 2% gain in oil prices boosted shares of ExxonMobil (XOM, news, msgs) and other energy companies while data showing moderate inflation lifted optimism about the economy.

The Dow Jones Industrial Average rose 71 points, or 0.53%, to nearly 13,554. The blue-chip index is up 258 points over two days, its biggest such advance since last July. It's still about 120 points below the record close it hit on June 4.

The Standard & Poor's 500 Index was up 7 points, or 0.48%, to almost 1,522, and the Nasdaq Composite Index gained 17 points, or 0.66%, to 2,599.

A day after the biggest gain in the Dow industrials in almost a year, stocks drew support from a government report that showed a modest rise in the May Producer Price Index excluding food and energy costs.

The data supported the notion inflation is in check even as the economy grows. If core inflation is under control, the Federal Reserve is less likely to lift interest rates, a worry that started dogging the market last week, when the yield on the benchmark 10-year Treasury note passed 5% for the first time since last summer.

The 10-year yield edged up slightly today to 5.22% from 5.21% late Wednesday, but stayed well below the peak of 5.295% reached Tuesday. The market's initial dismay over rising bond yields and the diminishing chance of a rate cut seemed to have alleviated; with Treasury yields appearing to have stabilized, the market is more at ease with the idea that the Fed probably won't lower rates this year, said Jay Suskind, head trader at Ryan Beck & Co.

"Now perhaps the glass is being seen as half-full," Suskind said. "If the reason for higher interest rates is growth, well, at the end of the day, that's what grows corporate earnings."

Prices paid to producers jumped 0.9% in May, mostly due to higher gas prices. That increase was greater than the 0.5% gain that economists had expected after April's 0.7% rise.

The core Producer Price Index, which excludes volatile energy and food prices, rose 0.2%, in line with economists' expectations. The core PPI also rose 0.2% in April.

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"After yesterday's big rally, core PPI was pretty much on consensus, but you had a high headline number," Michael Pond, an interest-rate strategist at Barclays Capital. told CNBC this morning. "That is rolling into inflation expectations. There is a concern here that even if inflation may not be taking off just yet, there are risks to the upside down the road."

Tomorrow, the Labor Department will report on the more closely watched Consumer Price Index, or CPI.

"CPI carries more weight," Peter Dunay, an investment strategist for the Leeb Group, told CNBC. "You have to worry that this might start to wear on the consumer, but the consumer still seems to be spending. They seem to be buying as long as that employment picture keeps picking up."

Energy and banks lead

Exxon's stock led the major advancers in the S&P 500 as crude rose on gasoline supply concerns.

Exxon shares rose 1.7% to $84.77 on the New York Stock Exchange. On the New York Mercantile Exchange, crude oil rose $1.39 to close at $67.65, the highest since last September.

Shares of General Motors (GM, news, msgs) rose 4.7% to $33.60 after reports said GM and bankrupt auto parts maker Delphi (DPHIQ, news, msgs) are "very close" to a deal with the United Auto Workers union that would help the supplier emerge from bankruptcy. GM was the Dow's second-biggest gainer, behind Exxon.

On the downside, Goldman Sachs (GS, news, msgs) shares dropped 3.4% to $225.75 as the investment bank's quarterly earnings disappointed investors.

Bear Stearns (BSC, news, msgs), one of the largest U.S. mortgage bond underwriters, said quarterly profit fell by a third. Its stock ended up 0.07% at $149.60.

• Video: More on earnings from Goldman and Bear

Besides energy, investors snapped up shares of transportation companies and big manufacturers, among the biggest beneficiaries of a growing economy.

Plane maker Boeing's (BA, news, msgs) stock rose 0.5% to $98.97, while shares of heavy equipment maker Caterpillar (CAT, news, msgs) gained 1% to $80.73.

Diversified manufacturer General Electric (GE, news, msgs) added 0.4% to $37.80 on the NYSE.

The Dow Jones Transportation Average (DJT, news, msgs) was up 1.5%, as shares of package delivery company United Parcel Service (UPS, news, msgs) rose 2.5% to $73.95.

Telecommunications company AT&T (T, news, msgs) was another standout, jumping 1.5% to $40.56 after Bear Stearns raised its price target on the stock. Verizon Communications' (VZ, news, msgs) price target was raised to $50 per share from $43 by HSBC, sending the stock up 0.8% to $43.22.

On the Nasdaq, Apple (AAPL, news, msgs) contributed the most to its gain. Apple's stock rose 1.1% to $118.75 on optimism about the company's upcoming iPhone, which will be sold by AT&T.

Trading was moderate on the NYSE, with about 1.45 billion shares changing hands, below last year's estimated daily average of 1.84 billion. Advancing stocks outnumbered declining ones by a ratio of about 2-to-1 on the NYSE and by about 3-to-2 on Nasdaq.

JPMorgan Chase moving to Ground Zero

At least one tenant is now set to establish a home in the new World Trade Center site.

JPMorgan Chase (JPM, news, msgs) is paying $300 million to the Port Authority of New York and New Jersey for a 92-year ground lease on Tower 5 and the right to build and occupy a 40-story building.

JPMorgan, which would be the first company to move into the Ground Zero construction space, had hoped to get the same tax breaks that Goldman Sachs received to build a headquarters across a street from the site.

JPMorgan had considered moving from midtown Manhattan to New Jersey or Connecticut if a deal was not reached.

Goldman secured its deal two years ago, before companies decided that rebuilding and relocating at the former World Trade Center site was attractive. But as building has begun at Ground Zero, the downtown Manhattan vacancy rate has fallen 3.6 percentage points to 7.6% in the first quarter of 2007, according to commercial-real-estate firm Grubb & Ellis.

The new building will provide JPMorgan with 1.3 million square feet of space.

Fake toothpaste found

Colgate-Palmolive (CL, news, msgs) is warning that fake toothpaste packaged as Colgate has been discovered in New York, New Jersey, Pennsylvania and Maryland.

The toothpaste could contain a poisonous chemical, diethylene glycol, which Colgate said it does not use in its toothpaste.

The phony toothpaste was found in dollar stores in the four states and is labeled "Manufactured in South Africa." There are misspellings on the packaging.

In late May, the FDA issued a warning and then blocked any toothpaste imported from China that contained that chemical, which is used in antifreeze.

EchoStar and Liberty Media eye Intelsat

Satellite-television broadcaster EchoStar (DISH, news, msgs) and media holding company Liberty Media (LINTA, news, msgs) are teaming up to make a bid for satellite-communications company Intelsat, The Wall Street Journal reported.

Intelsat would accept final offers today, and bids could top $5.5 billion, the newspaper said.

Intelsat was taken private in 2004 by a consortium of private-equity players for $3.1 billion.

Liberty is scheduled to take over control of DirecTV Group (DTV, news, msgs), a direct rival to EchoStar. But EchoStar and Liberty have been looking for ways to cut costs, and a joint purchase of Intelsat could be that answer, the paper explained.

Fries and pancakes: Perfect together?

Pancake giant IHOP (IHP, news, msgs) is about to eat up restaurant chain Applebee's International (APPB, news, msgs) for more than $2 billion, according to Bloomberg News.

The Bloomberg report cited people familiar with the matter, but Oppenheimer & Co. analyst Michael Smith told The Wall Street Journal that the rumor was unlikely to be true.

"I don't believe it," Smith said. IHOP, which has franchised almost all its 1,300 pancake houses, is "not in the business of running restaurants," Smith said.

But IHOP has said it is interested in an acquisition.

"We are looking for a noncompetitive restaurant concept that is already franchising or able to be franchised that is of sufficient size and could be acquired at a reasonable price," IHOP CEO Julia Stewart said during the company's earnings conference call in February.

Applebee's put itself on the block the same month. Add to that the fact that Stewart came from Applebee's, and there just might be something to the buzz, C.L. King & Associates analyst Michael Gallo told Bloomberg.

Shoplifting at Wal-Mart

Shoppers are leaving retail giant Wal-Mart Stores (WMT, news, msgs) with lots of goods, from televisions to toilet paper, but it seems that many aren't paying.

Shoplifting could take a $3 billion toll on Wal-Mart this year, according to retail consultant Burt Flickinger III. Flickinger and other retail analysts are speculating that Wal-Mart's decision last year to no longer prosecute minor thefts at its stores could be part of the reason for the huge losses.

Wal-Mart made $348.6 billion in sales in 2006.

By Elizabeth Strott with wires