* Year-on-year CPI up 1 pct, smallest gain in four years
* October retail sales exceed forecast, showing demand picking up
* J.C. Penney shares jump after results
* Priceline stock up on Goldman bullish view
* Dow up 0.2 pct, S&P 500 up 0.2 pct, Nasdaq up 0.4 pct
By Luke Swiderski
NEW YORK, Nov 20 (Reuters) - U.S. stocks rose on Wednesday after an economic report showed the annual inflation rate remains subdued, giving the Federal Reserve room to keep its stimulus measures in place.
The Consumer Price Index dipped 0.1 percent last month and rose only 1 percent for the 12 months through October, the smallest year-over-year increase since 2009. The Federal Reserve’s target inflation rate is 2 percent so the CPI data gives the central bank one less reason to cut back on its accommodative policy.
“The markets are more focused on inflation, and the implication there is that’s not going to give anybody reason to say we’re overdoing this on the monetary side,” said Howard Simons, strategist at Bianco Research in Chicago.
Another catalyst for the market’s moves may come with the release of the minutes from the Fed’s most recent policy-setting meeting, due at 2 p.m. EST (1900 GMT). The minutes will be scrutinized for further clues on the future of a policy that has put the S&P 500 on track to post its best year in a decade.
The Dow industrials climbed above 16,000 earlier on Wednesday and then backed away. The Dow has traded above 16,000 over the last couple of sessions but failed to close above that level, while the S&P 500 faces resistance at 1,800. A solid move above those levels could further attract investors and money managers eager to chase performance.
The Dow Jones industrial average rose 25.46 points or 0.16 percent, to 15,992.49. The S&P 500 gained 4.18 points or 0.23 percent, to 1,792.05. The Nasdaq Composite added 15.82 points or 0.40 percent, to 3,947.36.
Deere & Co shares gained 2.9 percent to $85.19 after the company, the world’s largest maker of agricultural equipment, reported higher-than-expected fourth-quarter profit and forecast 2014 earnings above estimates.
Home improvement chain Lowe’s shares fell 5 percent to $47.94. The stock was the S&P 500’s second-biggest drag after the retailer reported slightly lower-than-expected quarterly earnings and gave a disappointing outlook for the year. The results underscored Lowe’s struggle to catch up with Home Depot , the market leader.
J.C. Penney jumped 8.4 percent to $9.44 and was the S&P 500’s best performer after the department store operator reported a deeper-than-expected net loss, but said sales were encouraging in November so far.
Priceline shot up 3.4 percent to $1,156.64 after Goldman Sachs added the online travel company’s stock to its “conviction buy” list.
In another snapshot of the economy from Wednesday’s data, October retail sales excluding automobiles, gasoline and building materials - a gauge of consumer spending known as core retail sales - rose 0.5 percent, exceeding expectations. The figure shows demand is picking up.
Fed Chairman Ben Bernanke, in a speech late Tuesday that echoed dovish comments by his nominated successor, Janet Yellen, said the U.S. central bank will maintain its ultra-easy monetary policy for as long as needed. The policy has been a pillar of the stock market’s rally.
A Reuters poll published before Wednesday’s data showed economists expected the Fed to begin reducing its $85 billion in monthly bond purchases by March, with a small chance it could do so as early as January.
Commerce Department data showed that U.S. business inventories grew more than expected in September, suggesting the government’s estimate of third-quarter growth could be revised higher. In contrast, U.S. existing home sales fell in October to the lowest since June because of an inventory shortage and high property prices, the National Association of Realtors said.