China, US data lift Wall Street from 3-month lows

US stocks in early trading on Tuesday after Chinese economic data drew investors into an equities market that has been through six weeks of sharp declines.

US retail sales declined, though less than forecast, giving a further boost to equities and some respite to investors overwhelmed by recent weak economic data.

"The consumer isn't dead," said Michael Farr, president of investment management firm Farr, Miller & Washington in Washington. "I question the sustainability, given the high levels of debt that consumers hold and the unemployment rate. But we don't want to look a gift horse in the mouth. It's good news for the day."

The S&P retail index edged up 1.3%.

Despite the sharp gains, some investors were still focused on a retreat in the S&P 500 index to its March low near the 1,250 level. The S&P closed flat on Monday after hitting a near three-month low last Friday.

The Dow Jones industrial average added 94.49 points, or 0.79%, to 12,047.46. The Standard & Poor's 500 Index gained 12.59 points, or 0.99%, to 1,284.42. The Nasdaq Composite Index rose 26.60 points, or 1.01%, to 2,666.29.

The S&P 500 is down more than 7% from its high in early May as soft data sparked worries about the sustainability of the economic recovery.

"I think we're seeing a dead cat bounce (on the equities market)," Farr said. "It could take time before the market finds a new bottom."

Inflation is still a concern in China after data showed consumer prices rose at their fastest pace in almost three years, but industrial output grew 13.3% from a year ago, in line with forecasts.

China's central bank later increased the reserve requirement ratio for commercial lenders by 50 basis points.

The Chinese output data helped boost metals prices, lifting mining and industrial shares. Freeport-McMoRan Copper & Gold Inc gained 1.4% to USD 49.01, while Caterpillar Inc rose 1% to USD 96.38.

"News out of China is somewhat encouraging in spite of the fact they raised reserve requirements," said Peter Cardillo, chief market economist at Avalon Partners in New York. He said the data is a sign that perhaps China's economy "can avoid a hard landing, and that's cheering the markets."

"The real focus will be on the fact that the market is in a technical correction," Cardillo said. "we have options expiration this week, so any rallies might continue to be short-lived."

Options expiration alters the market regardless of fundamentals as traders and investors try to "pin," or lock in the S&P 500 at a preset level to make their bets more profitable.

Best Buy Co Inc beat quarterly profit and sales estimates on strong demand for mobile phones, calling plans and tablet computers. Its shares rose 7% to USD 30.85.