* Year-on-year CPI up 1 pct, smallest gain in four years
* October retail sales exceed forecast, show demand pickingup
* J.C. Penney shares jump after results
* Priceline stock up on Goldman bullish view
* Dow up 0.1 pct, S&P 500 up 0.1 pct, Nasdaq up 0.2 pct
By Luke Swiderski
NEW YORK, Nov 20 (Reuters) - U.S. stocks gained slightly onWednesday after data showed the annual inflation rate wassubdued and ahead of the release of the minutes from the Fed'smost recent policy-setting meeting.
The Consumer Price Index dipped 0.1 percent last month androse only 1 percent for the 12 months through October, thesmallest year-over-year increase since 2009. The FederalReserve's target inflation rate is 2 percent so the CPI datagives the central bank one less reason to cut back its stimulusmeasures.
J.C. Penney shot up 7 percent to $9.32. It was theS&P 500's best performer after the department store operator said November sales were encouraging. The results indicated thata turnaround of J.C. Penney is starting to "take hold," ChiefExecutive Myron Ullman told analysts on a call.
"To me, there's a big inflection point that took placetoday. Investor concerns have now switched from 'Are they goingbankrupt? Do they have enough liquidity?' to 'How is thisturnaround playing out? 'It's a change of narrative to thepositive," said Mike Binger, senior portfolio manager atGradient Investments in Minneapolis, referring to J.C. Penney.
The market may get another catalyst with the release of theminutes from the Fed's most recent policy-setting meeting, dueat 2 p.m. EST (1900 GMT). The minutes will be scrutinized forfurther clues on the future of a policy that has put the S&P 500on track to post its best year in a decade.
The Dow industrials climbed above 16,000 earlier onWednesday, touching an intraday high of 16,016.85, and thenpulled back slightly. The Dow has traded above 16,000 over thelast couple of sessions but failed to close above that level,while the S&P 500 faces resistance at 1,800. A solid move abovethose levels could further attract investors and money managerseager to chase performance.
The Dow Jones industrial average rose 10.56 points or0.07 percent, to 15,977.59. The S&P 500 gained 1.68points or 0.09 percent, to 1,789.55. The Nasdaq Composite added 8.48 points or 0.22 percent, to 3,940.04.
Deere & Co shares advanced 2.4 percent to $84.78after the maker of tractors and harvesters reportedhigher-than-expected fourth-quarter profit and forecast 2014earnings above estimates.
Home improvement chain Lowe's shares fell 4.6percent to $48.11. The stock was the S&P 500's second-biggestdrag after the retailer reported slightly lower-than-expectedquarterly earnings and gave a disappointing outlook for theyear. The results underscored Lowe's struggle to catch up withHome Depot, the market leader.
Priceline gained 3.2 percent to $1,154.21 afterGoldman Sachs added the online travel company's stock to its"conviction buy" list.
In another snapshot of the economy from Wednesday's data,October retail sales excluding automobiles, gasoline andbuilding materials - a gauge of consumer spending known as coreretail sales - rose 0.5 percent, exceeding expectations. Thefigure shows demand is picking up.
Fed Chairman Ben Bernanke, in a speech late Tuesday thatechoed dovish comments by his nominated successor, Janet Yellen,said the U.S. central bank will maintain its ultra-easy monetarypolicy for as long as needed. The policy has been a pillar ofthe stock market's rally.
A Reuters poll published before Wednesday's data showedeconomists expected the Fed to begin reducing its $85 billion inmonthly bond purchases by March, with a small chance it could doso as early as January.
Commerce Department data showed that U.S. businessinventories grew more than expected in September, suggesting thegovernment's estimate of third-quarter growth could be revisedhigher. In contrast, U.S. existing home sales fell in October tothe lowest since June because of an inventory shortage and highproperty prices, the National Association of Realtorssaid.
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