The February consumer price index, or CPI, was the catalyst for strong buying in Treasuries. The CPI, which looks for inflation in retail prices, rose only 0.1 percent, as did the core rate, which excludes volatile food and energy prices. Not only did this show that inflation was a nonfactor, but it also was below analysts' estimates for a 0.2 percent rise for both overall CPI and the core.

A dip in housing starts and building permits provided further evidence of economic cooling. February starts plunged 7.9 percent to an annual rate of 2.12 million units - far below the previous 2.3-million mark but more than analysts' predictions for 2.04 million units; while building permits - an indicator of future activity - fell 3 percent to an annual rate of 2.15 million.

First-time jobless claims for the week ended March 11 were up for the third straight time, rising to 309,000 - the highest level since December. The four-week average, which smoothes volatility, rose to 296,500. Continued claims, however, fell to 2.45 million, the lowest level since February 2001. These are benefits paid to people out of work for more than one week.

The noon release of the Philly Fed index on March manufacturing conditions sealed Treasury gains, dropping to 12.3 from the previous reading of 15.4. Within the report, new orders rose, but the 'prices-paid' index declined sharply for the second straight month - good news for inflation-watchers.

Dow nears five-year high

It was a tale of two markets as the Dow Jones industrials added another day's worth of gains, while a sell-off in semiconductors pushed the Nasdaq into negative territory. Both the Dow and the Standard & Poor's 500 index made a run at a five-year high as interest rates fell and inflation worries evaporated - at least for today. The indexes traded in positive territory from open to close, but ended the session off their highs for the day. The Nasdaq traded positive for most of the session, but took a dive in the last two hours of trading, closing near its low.

The Dow Jones industrials were bolstered by a couple of big gainers, but 18 of the 30 components closed in positive territory. GM led with a 3.4-percent increase, followed by Wal-Mart, which added 2.3 percent. Interest-sensitive stocks such as 3M, Alcoa and Home Depot rose about 1 percent each, and Exxon was up 1.2 percent on an increase in oil prices. Oil jumped $1.41 today to close at $63.58. Intel was the only Dow component to shed more than 1 percent.

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