* Year-on-year CPI up 1 pct, smallest gain in four years
* October retail sales exceed forecast, show demand picking up
* 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 on Wednesday after data showed the annual inflation rate was subdued and ahead of the release of the minutes from the Fed's most recent policy-setting meeting.
The Consumer Price Index dipped 0.1 percent last month and rose only 1 percent for the 12 months through October, the smallest year-over-year increase since 2009. The Federal Reserve's target inflation rate is 2 percent so the CPI data gives the central bank one less reason to cut back its stimulus measures.
J.C. Penney shot up 7 percent to $9.32. It was the S&P 500's best performer after the department store operator said November sales were encouraging. The results indicated that a turnaround of J.C. Penney is starting to "take hold," Chief Executive Myron Ullman told analysts on a call.
"To me, there's a big inflection point that took place today. Investor concerns have now switched from 'Are they going bankrupt? Do they have enough liquidity?' to 'How is this turnaround playing out? 'It's a change of narrative to the positive," said Mike Binger, senior portfolio manager at Gradient Investments in Minneapolis, referring to J.C. Penney.
The market may get another catalyst with the release of the minutes from the Fed's most recent policy-setting meeting, due at 2 p.m. EST (1900 GMT). The minutes will be scrutinized for further clues on the future of a policy that has put the S&P 500 on track to post its best year in a decade.
The Dow industrials climbed above 16,000 earlier on Wednesday, touching an intraday high of 16,016.85, and then pulled back slightly. The Dow has traded above 16,000 over the last couple of sessions but failed to close above that level, while the S&P 500 faces resistance at 1,800. A solid move above those levels could further attract investors and money managers eager to chase performance.
The Dow Jones industrial average rose 10.56 points or 0.07 percent, to 15,977.59. The S&P 500 gained 1.68 points 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 $84.78 after the maker of tractors and harvesters reported higher-than-expected fourth-quarter profit and forecast 2014 earnings above estimates.
Home improvement chain Lowe's shares fell 4.6 percent to $48.11. The stock was the S&P 500's second-biggest drag after the retailer reported slightly lower-than-expected quarterly earnings and gave a disappointing outlook for the year. The results underscored Lowe's struggle to catch up with Home Depot, the market leader.
Priceline gained 3.2 percent to $1,154.21 after Goldman 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 and building materials - a gauge of consumer spending known as core retail sales - rose 0.5 percent, exceeding expectations. The figure shows demand is picking up.
Fed Chairman Ben Bernanke, in a speech late Tuesday that echoed dovish comments by his nominated successor, Janet Yellen, said the U.S. central bank will maintain its ultra-easy monetary policy for as long as needed. The policy has been a pillar of the stock market's rally.
A Reuters poll published before Wednesday's data showed economists expected the Fed to begin reducing its $85 billion in monthly bond purchases by March, with a small chance it could do so as early as January.
Commerce Department data showed that U.S. business inventories grew more than expected in September, suggesting the government's estimate of third-quarter growth could be revised higher. In contrast, U.S. existing home sales fell in October to the lowest since June because of an inventory shortage and high property prices, the National Association of Realtors said.