Stocks advance after lower inflation reading

Though Wednesday's data was comforting and major indexes are approaching their highs of the month, that doesn't mean Wall Street has conquered its problems and is set for a rebound from months of turmoil. Analysts warn that examining stocks by sector shows that one in particular is still being left behind -financials.

Steve Goldman, chief market strategist at Weeden & Co., said he remains troubled about the financial industry's underperformance amid lingering worries that the credit crisis is still not over. He said that sector has been pulled higher by the market's recent overall rise, but isn't taking the leadership position needed to lead a bona fide rally.

"They tend to outperform the S&P by a 50 percent margin, but we're not seeing that at all," he said of financials. "This has been a nice rally, but for those of us that are bullish about the market, we're going to need to see them outperform in order to feel comfortable going long."

Concerns that major investment banks and retail banks have more write-downs in coming quarters has put pressure on their stock prices. For instance, Lehman Brothers Holdings Inc. is down about 8.5 percent from its highs this month, while the S&P is down by only 1 percent.

"They led us into the crisis, but they're not yet leading us out of it," he said. "That's what needs to happen."

On Tuesday, leadership went to technology stocks -with the Nasdaq at one point up 1.3 percent. However, investors collected profits during the last hour of trading and sent big tech names sharply lower. Apple Inc. fell $3.70, or 2 percent, to $182.26, after trading as high as $192.24 during the session.

In corporate news, Macy's Inc. reported it lost $59 million in the first quarter because of weaker sales and costs tied to combining businesses. But the results topped Wall Street's expectations and the stock rose 87 cents, or 3.6 percent, to $24.93.

Deere & Co. said its fiscal second-quarter profit rose 22 percent as higher crop prices drove global demand for its farm equipment. But the company said rising costs of raw materials could eat into its profits in the coming months. Deere fell $8.94, or 9.9 percent, to $81.25.

Jack in the Box Inc. fell $2.90, or 9.9 percent, to $24.87 after the fast food chain said sales at restaurants open at least a year fell short of forecasts for the fiscal second quarter. The company lowered its sales target for the third quarter.

Advancing issues outnumbered decliners by more than 3 to 2 on the New York Stock Exchange, where consolidated volume came to 3.86 billion shares, which is about even with Tuesday.