HP leads Dow higher

Stocks and bonds Wednesday shook off a surprising jump in consumer price inflation and another record close for oil prices.

Stocks finished broadly higher and long-term Treasury yields ended flat to lower as a strong belief that the Federal Reserve would continue to cut short-term interest rates trumped other worries.

The Dow Jones industrials gained 90.04 points, or 0.7%, to 12,427.26, thanks in part to a nearly 8% gain in shares of Hewlett-Packard after the tech giant said fiscal first-quarter earnings surged 38%.

The inflation news was bad across the board. The government said the Consumer Price Index rose a faster-than-forecast 0.4% in January and was up a steep 4.3% over the last 12 months.

What’s more, near-term crude oil futures in New York ended at a new high, rising 73 cents to $100.74 a barrel. The Reuters/Jefferies CRB index of 19 major commodities also edged up to a new high.

Rising inflation usually is negative for financial markets. The CPI report pushed the Dow down 110 points early on and briefly drove the yield on the 10-year Treasury note to 3.95% -- the highest since Jan. 1 -- from 3.89% on Tuesday.

But buyers returned to stocks and bonds as the session progressed. Winners topped losers by more than 3 to 2 on the New York Stock Exchange, and the T-note yield ended unchanged.

The Fed released the minutes of its last meeting, and the discussions among central bank officials at that gathering indicated that they were leaning toward additional rate cuts to support the economy, despite inflation risks.

“I think they are clearing the way for more easing,” said Carl Lantz, U.S. interest rate strategist at Credit Suisse in New York. That is giving the stock market comfort, analysts said.

What’s more, some investors, fearing continued upheaval in the financial system from losses on mortgage-related securities, continue to favor Treasury bonds as a safety play even though yields are low relative to inflation, analysts say.

Many investors also might be betting that commodity prices, and inflation, will wane if the economy continues to weaken, experts say.

Still, inflation fears were evident in gold prices, a classic inflation hedge: Near-term futures jumped $8 to a record $934.60 an ounce in New York.

Among the day’s market highlights:

* Broader stock indicators were higher. The Standard & Poor’s 500 advanced 11.25 points, or 0.8%, to 1,360.03. The Nasdaq composite added 20.90 points, or 0.9%, to 2,327.10.

* Hewlett-Packard jumped $3.49 to $47.44 on its profit report and upbeat forecast. Also in the tech sector, IBM gained $2.85 to $107.85 and Apple rose $1.64 to $123.82.

But Google struggled, inching up 5 cents to $509. The stock is down 26% year to date.

* Financial issues were mostly higher. Wells Fargo rose 79 cents to $30.65. The biggest bank on the West Coast will increase acquisitions this year, and the targetswill probably be larger than the banks bought recently, Chairman Richard Kovacevich said.

* TJX spurred a rally in retailers after the owner of the T.J. Maxx and Marshalls chains said fourth-quarter profit rose 47% as marketing helped lure bargain-focused shoppers. TJX jumped $1.45 to $31.18. Target rose $1.18 to $53.40.

* AT&T; and Verizon Communications fell for a second day on plans to offer flat-rate plans for unlimited mobile calls. AT&T; slid $1.53 to a 52-week low of $34.36. Verizon eased 10 cents to $35.24, also a 52-week low.

* Suntech Power plunged $5.65 to $40.24, continuing its steep slide since the start of the year, when it traded as high as $88. The China-based maker of solar-power modules reported a 61% jump in quarterly earnings but posted lower-than-expected sales of $397 million.

Other Chinese solar-related issues also fell sharply, including LDK Solar, down $2.09 to $32.60, and Trina Solar, down $2.03 to $33.22.