US stocks rally despite disappointing inflation data

Beaten-down Wall Street stocks rallied Thursday, shrugging off worries about additional interest rate hikes following the latest batch of worrisome inflation data.

The eurozone annual inflation rate fell by less than expected to 8.5 percent in February, the EU's statistics agency said. Food and drink prices rose especially sharply in the period.

"The February reading is a clear setback, but forward-looking indicators show that the declining trend in inflation is set to continue," said ING senior eurozone economist Bert Colijn.

European Central Bank chief Christine Lagarde said after the data was released that more interest rate hikes might be needed in the eurozone after the half percentage point hike it has already signalled coming later this month.

Still, European bourses mustered modest gains.

US stocks opened meekly before doing an about-face and forging higher in one of the most upbeat sessions in weeks.

"The market was just primed to bounce after steady selling in February and early March," said analyst Patrick O'Hare.

He added that the rally was supported by the ability of the S&P 500 to hold above a key technical level, and comments from Atlanta Federal Reserve President Raphael Bostic favoring a quarter-point interest rate hike at the central bank's next meeting.

All three major US indices finished in positive territory, with the S&P 500 up 0.8 percent.

The rally in New York came despite an advance by the 10-year US Treasury note above four percent and a rally in the dollar.

"Markets sense that US inflation making a gradual and bumpy descent could mean that the Fed needs to step up its attack on high prices," said Joseph Manimbo of Convera.

"Consequently, there is a fairly low but rising risk of the Fed having to opt for larger 50 basis point rate hikes to put inflation on a smoother path back down to officials' two percent target."

Among individual companies, Dow member Salesforce surged 11.5 percent as the technology giant announced it was boosting its share repurchase program to $20 billion, after better-than-expected results.

Tesla slumped 5.9 percent after the company's investor day offered few clues on the timing or design of future vehicles.

Analysts had been hoping for an auto priced at around $25,000 to compete with upcoming products from other automakers.

- Key figures around 2130 GMT -

New York - Dow: UP 1.1 percent at 33,003.57 (close)

New York - S&P 500: UP 0.8 percent at 3,981.35 (close)

New York - Nasdaq: UP 0.7 percent at 11,462.98 (close)

London - FTSE 100: UP 0.4 at 7,944.04 (close)

Frankfurt - DAX: UP 0.2 percent at 15,327.64 (close)

Paris - CAC 40: UP 0.7 percent at 7,284.22 (close)

EURO STOXX 50: UP 0.6 percent at 4,240.59 (close)

Tokyo - Nikkei 225: DOWN 0.1 percent at 27,498.87 (close)

Hong Kong - Hang Seng Index: DOWN 0.9 percent at 20,429.46 (close)

Shanghai - Composite: DOWN 0.1 percent at 3,310.65 (close)

Euro/dollar: DOWN at $1.0599 from $1.0668 on Wednesday

Pound/dollar: DOWN at $1.1949 from $1.2029

Euro/pound: DOWN at 88.68 pence from 88.69 pence

Dollar/yen: UP at 136.73 yen from 136.19 yen

Brent North Sea crude: UP 0.5 percent at $84.75 per barrel

West Texas Intermediate: UP 0.6 percent at $78.16 per barrel