Stocks rise in erratic trading after economic, earnings data

After a recent spate of disappointing readings on the economy, investors were pleased that the New York Federal Reserve reported that regional manufacturing expanded modestly in April, after shrinking at a record clip in March. The market had expected another contraction.

And in a positive sign for earnings, health care products maker Johnson & Johnson said its first-quarter profit jumped 40 percent on rising sales and declining costs. Results from the maker of consumer staples ranging from baby shampoo to pharmaceuticals came as a relief to investors, following a spate of mostly disappointing earnings reports last week and Monday.

But the market remains anxious about inflation. As crude oil prices surged to a record near $114 a barrel, the Labor Department's Producer Price Index registered a much higher-than-anticipated 1.1 percent rise for March. The core index, which strips out food and energy prices, rose by 0.2 percent, as expected.

Core producer price increases have slowed over the past three months, so most investors are not too worried that inflation will keep the Federal Reserve from lowering interest rates again if the economy weakens further. However, food and energy prices keep rising, so consumers have been paring back their discretionary spending to afford necessities and that is hurting corporate profits.

"My guess is people are still really concerned about the inflation impact down the road. If oil stays where it is, it's going to be a problem," said Philip S. Dow, managing director of equity strategy at RBC Dain Rauscher in Minneapolis.

High oil prices are one reason Wall Street is pessimistic about the airline industry right now. Delta Air Lines Inc.'s and Northwest Airlines Corp.'s combination to create the world's largest carrier weighed on the stock market Tuesday, with investors uneasy about the stock-swap deal. Delta fell $1.53, or 14.5 percent, to $8.95, while Northwest fell $1.21, or 10.8 percent, to $10.01.

In early afternoon trading, the Dow Jones industrial average was up 20.27, or 0.16 percent, to 12,322.33.

Broader stock indicators also turned higher. The Standard & Poor's 500 index rose 1.60, or 0.12 percent, to 1,329.92, and the Nasdaq composite index rose 2.98, or 0.13 percent, to 2,278.80.

Two Nasdaq stocks Crocs Inc. and Affymetrix Inc. dragged on the index after they both lowered their forecasts. Crocs, the casual footwear company, sank $7.14, or 40 percent, while Affymetrix, the genetic analysis product maker, tumbled $5.88, or 36 percent, to $1.045.