By Gavin Adamson

(October 19 – 17:45 EST) – After three days of frenzied selling by North American investors, the U.S. Consumer Price Index, a key indicator of inflationary pressures, came out fairly flat for September, and stocks inched back up.

The CPI, which measures a broad basket of consumer prices, saw just a 0.4% gain last month, and just 0.3% if you take out volatile food and energy prices. The index is up by 2% over the past year, near its 33-year low.

Stock traders embraced the news as a good signal for continued low inflation and interest rates.
Many of the TSE 300’s 14 subindexes traded higher, led by the financial services group, but the index still closed down by 14.32, to 6,853.92, because gold continued to its downward skid.

The transportation sector saw a lot of action because Air Canada layed out its alternative to Onex Corp.’s hostile merger/takeover bid. Air Canada’s Star Alliance partners, Lufthansa and UAL Corp., United Airlines parent company, said they’ll donate C$730 million to Air Canada’s cause. It plans to buyback up to 35% of its shares at $12 per share, and it also bid $92 million in cash for rival Canadian Airlines Corp. Air Canada shares were up 35¢ to $10.10 on the day, and Canadian Airlines was up 5¢ to $1.74.

Nortel Networks Corp., the most active issue on the TSE today, was down $2.25 to $75.75 at one point, after announcing it will pay a hefty price for one of its own tech suppliers, Clarify Inc.

U.S. analysts seem to be unsure how the U.S. Federal Reserve Board will view the latest CPI numbers, although they will definitely be a consideration, when the Federal Open Market Committee makes it’s next decision on interest rates on November 16.

U.S. traders definitely liked the CPI. The Dow closed up by 88.65 to 10,204.93, and the S&P 500 also inched up by 7.21, to 1,261.34. The financial stocks, always interest-rate sensitive, were among the big gainers. For example, American Express took on US$2 3/4 to close at US$140 5/8. Citigroup and Chase Manhattan saw similar gains. Winners outplayed losers on the NYSE by a margin of 17 to 13.

Nasdaq was a different story because hardware tech stocks are under downward pressure. The speculation is that rising microchip prices will eat into company earnings. Dell Computer Corp., the most active stock today, dropped US$3 1/4 to close at $37 3/4, but others like Microsoft were dragged down too. Although Microsoft bounced back in after-hours trading after it beat Wall Street estimates with its first quarter earnings. It was also announced that a decision in the firm’s anti-trust suit is due out Friday. At the close today gainers beat out losers by 21 to 16, but the Nasdaq index still slipped by 0.84 to 2,688.31.