Stocks advance in session

Stocks surged for a second day Thursday after a government report showed a key measure of wholesale prices rising at a gentle pace.

The market was unfazed by the Labor Department’s overall producer price index, which rose 0.9% in May because of surging gasoline prices -- a bigger increase than in April and higher than economists predicted. Investors instead were pleased that the “core” index, which strips out often-volatile food and energy costs, posted a 0.2% rise, as expected, after a flat reading in April.

Many investors believe that if core inflation is under control, the Federal Reserve is unlikely to lift short-term interest rates. The possibility of a tightening by the Fed dogged the market last week, when the yield on the benchmark 10-year Treasury note passed 5% for the first time since last summer.

The yield on the 10-year note rose Thursday to 5.22% from 5.20% late Wednesday, but stayed well below the peak of 5.30% reached Tuesday. The market’s initial dismay over rising bond yields and the diminishing chance of a rate cut seems to have abated, 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.”

The consumer price index, an inflation gauge that is even more closely watched by the Fed than the producer price index, is to be released today.

The Dow Jones industrials jumped 71.37 points, or 0.5%, to 13,553.72. The Dow has risen 258 points over the last two sessions, logging its largest two-day point gain since July.

The index is still 122 points below the record close it hit June 4, but it is up 287 points from 13,266.73 -- the trough it tumbled to June 7 after rising yields started spooking investors.

Broader stock indicators also rose Thursday. The Standard & Poor’s 500 index advanced 7.30 points, or 0.5%, to 1,522.97, and the Nasdaq composite index climbed 17.10, or 0.7%, to 2,599.41.

The Russell 2,000 index of smaller-company stocks climbed 4.58 points, or 0.6%, to 837.12.

Advancing issues outnumbered decliners by nearly 2 to 1 on the New York Stock Exchange.

The dollar rose against the yen and was unchanged versus the euro. Gold prices climbed.

Crude oil prices jumped $1.39 to $67.65 a barrel on the New York Mercantile Exchange, buoying oil company stocks. Shares of ExxonMobil, Chevron and ConocoPhillips rose more than 1%.

In other economic data Thursday, the Labor Department said initial unemployment claims totaled 311,000 last week, unchanged from the previous week and a better result than the market expected.

A dearth of economic and earnings data last week gave investors time to mull over this year’s sharp rise in stocks, and they took some money off the table. But with Thursday’s inflation numbers arriving in line with most economists’ estimates and with bond yields retreating, many on Wall Street decided to jump back into stocks.

“The aggregate of all the statistics of the last month, except those related to home building, has pointed to a stronger economy,” said John Merrill, chief investment officer of Tanglewood Capital Management in Houston.

Merrill added that although high yields were seen as unfavorable because they slowed down corporate deal making, it was important to note that the 10-year Treasury yield’s jump over the last two weeks had helped long-term yields exceed short-term yields.

Over the last several months, short-term yields were approximately equal to or higher than long-term yields -- an unusual pattern that implied the economy was headed for a slowdown or recession. A return to normalcy in the bond market is a positive sign that the economy is on the upswing, Merrill said.

In other market highlights:

* Chicago Mercantile Exchange Holdings offered to pay a special dividend of $485 million to CBOT Holdings shareholders in addition to its $10.19-billion takeover offer. CBOT, the parent company of the Chicago Board of Trade, gained $3.31, or 1.6%, to $204.81. Chicago Mercantile fell $3.76 to $547.49.

* Goldman Sachs Group slipped $7.89, or 3.4%, to $225.75 after the investment bank said second-quarter earnings were hurt by a slowdown in its mortgage business.

* Clearwire soared $4.63, or 23%, to $24.50 after the company said it was joining with two satellite-TV firms to offer its wireless high-speed Internet service.

* Stocks rallied overseas. Key indexes rose 0.6% in Japan, 1.4% in Britain, 2.2% in Germany and 1.9% in France.