Stocks, bonds rally amid inflation debate

U.S. stocks climbed to record highs and Treasuries rallied after a core inflation reading slowed, adding to evidence that economic growth continues apace without stoking price increases. The dollar pared losses.

Bonds in Europe gained after a report that the European Central Bank may continue asset purchases for at least nine months after it starts tapering in January. The Stoxx Europe 600 Index climbed, led by steelmakers and miners as most industrial metals gained and crude oil rose back above $51 a barrel.

“There’s nothing here to suggest why the core number was as weak as it is, but that’s just consistent with the trends that we’ve seen,” said Phil Orlando, chief equity strategist at Federated Investors Inc. “Inflation has been befuddling everyone for a really long time.”

The S&P 500 Index rose 0.1 percent to 2,553.17. The Dow Jones Industrial Average increased 0.1 percent and the Nasdaq Composite Index gained 0.2 percent. All three indexes hit record highs.

Excluding food and energy, so-called core prices rose 0.5 percent in September, below an estimate of 0.6 percent. At the same time, a Commerce Department report also released Friday showed U.S. retail sales rose in September by the most in more than two years, as Americans replaced storm-damaged cars and paid higher prices at the gasoline pump. Excluding autos and gas, sales still increased at the secondfastest pace since January.

The inflation data bolstered the view that U.S. inflation below the Federal Reserve’s target may be structural rather than transitory, prompting traders to slightly reduce the odds of another rate increase in December.