(Updates close with declines in Apple, energy shares)
* Modest rise in CPI supports stocks
* Freddie Mac smaller than expected loss reassures
* Strong Macy's results lift retailers
By Caroline Valetkevitch
NEW YORK, May 14 (Reuters) - U.S. stocks rose on Wednesday
in light trading after a modest rise in consumer prices in
April cooled inflation fears while Macy's Inc <M.N> and
Freddie Mac <FRE.N> posted reassuring quarterly results.
A milder-than-expected gain in the Consumer Price Index
took the edge off fears of an inflationary spurt triggered by
soaring energy prices. That could allow the Federal Reserve
more time to hold interest rates steady, analysts said.
Shares of retailers and home builders, which benefit from
steady to lower borrowing costs, advanced. The S&P retail
index <.RLX> rose 1.6 percent, as Macy's stood by the profit
forecast for its department stores despite expectations of an
economic slowdown.
Freddie Mac, seen as a housing market barometer,
brightened the mood on Wall Street by raising its growth
outlook and unveiling a plan to raise new capital to support
the beleaguered home loan market.
"People were nervous about the inflation number. When it
was somewhat better than expected, that triggered the rally,"
said Eric Kuby, chief investment officer at North Star
Investment Management Corp., in Chicago.
Stocks pared gains late in the session, leaving the Nasdaq
just barely higher. Shares of Apple Inc <AAPL.O> as investors
took profits after two days of gains in the stock.
The market's sharp climb "ran out of steam without another
leg of news to keep the rally going," Kuby said.
The Dow Jones industrial average <> rose 66.20 points,
or 0.52 percent, to end at 12,898.38. The Standard & Poor's
500 Index <.SPX> added 5.62 points, or 0.40 percent, to
1,408.66. The Nasdaq Composite Index <> inched up 1.58
points, or 0.06 percent, to 2,496.70.
Trading was extremely light on the New York Stock
Exchange, with about 1.19 billion shares changing hands, well
below last year's estimated daily average of roughly 1.90
billion, and the second-lowest level of volume so far this
year. NYSE trading volume hit its low for the year on Monday,
when 1.05 billion shares traded hands.
However, the Chicago Board Options Exchange Volatility
Index <.VIX>, or VIX, which is Wall Street's fear barometer,
slid at one point to its lowest level since October 2007 as
stocks rallied. The VIX was down 1.8 percent at the close.
Shares of Macy's rose 3.6 percent to $24.93.
Freddie Mac, the No. 2 provider of funding for U.S.
residential mortgages, shot up 9.2 percent to $27.25.
The Dow Jones home construction Index <.DJUSHB> climbed
2.7 percent. The stock of D.R. Horton Inc <DHI.N>, the largest
U.S. home builder, jumped 2.9 percent to $15.36.
APPLE FALLS, ENERGY SLIPS
On the Nasdaq, shares of Apple declined 2 percent to
$196.26. Also, top video game publisher Electronic Arts Inc
<ERTS.O> dropped 3.3 percent to $52.78. Late Tuesday, the
company issued an annual profit outlook that fell short of
Wall Street forecasts.
Energy companies' stocks also fell after U.S. crude <CLc1>
slid $1.58 to settle at $124.22 per barrel, a day after it
approached a record just 2 cents shy of $127. The S&P energy
index <.GSPE> ended down 0.9 percent.
Shares of Deere & Co <DE.N> tumbled 9.9 percent to $81.25
and ranked among the top drags on the S&P 500 after the farm
and construction machinery company warned that higher material
costs and possible shortages of components will affect results
Among other drags on Nasdaq: Whole Foods Market Inc
<WFMI.O> sank 13.9 percent to $28.96 after it posted a lower
quarterly net profit that missed analysts' estimates. For
details, see []
Before the opening bell, the Labor Department said the
overall CPI for April rose 0.2 percent -- less than economists
expected. Core CPI, excluding volatile food and energy costs,
gained 0.1 percent in April -- also below forecast.
The Fed's seven rate cuts, amounting to 3.25 percentage
points, have now taken the Fed's benchmark fed funds rate down
to 2 percent. The Fed's most recent rate decision, which
analysts speculated could be the last for the near term, was
on April 30.
(Editing by Jan Paschal)
