Dow Rises 172 Points on Rosy GDP Data
The stock market turned around with a vengeance Friday as a report showing surprising economic vigor sparked a 172-point jump in the Dow index.
The government’s estimate of third-quarter gross domestic product growth cheered investors after three straight days of share price declines.
“The good GDP report came in spite of hurricanes Katrina and Rita -- to me that’s kind of amazing,” said Phil Dow, a strategist at Minneapolis brokerage RBC Dain Rauscher.
The news encouraged investors who are hoping that corporate earnings can continue to climb, underpinning equity prices, analysts said.
The GDP report overshadowed a separate report showing another drop in consumer confidence. The University of Michigan’s confidence index slipped 1.2 points this month to a 13-year low of 74.2.
In Friday’s trading, the Dow Jones industrial average zoomed 172.82 points, or 1.7%, to 10,402.77. However, that just returned the Dow near to where it had been Oct. 19.
The broader Standard & Poor’s 500 index rallied 19.51 points, or 1.7%, to 1,198.41, and the technology-heavy Nasdaq composite rose 26.07 points, or 1.3%, to 2,089.88.
Winners outnumbered losers by nearly 3 to 1 on the New York Stock Exchange and by 2 to 1 on Nasdaq.
The gains left the blue-chip indexes up for the week after three down weeks and gave Nasdaq its second straight weekly advance. The Dow rose 1.8%, the S&P; 500 gained 1.6% and Nasdaq added 0.4%.
Friday’s upswing boosted optimism among Wall Street bulls as the market enters what historically has been its best season.
Since 1950, November, December and January have made up the market’s strongest three-month stretch of the year, with average gains for the S&P; 500 of 1.7%, 1.6% and 1.4%, respectively, according to the Stock Trader’s Almanac.
With one trading day left in October, the blue-chip S&P; is down 2.5% this month.
Neil Hennessy, manager of the Hennessy Cornerstone Growth Fund in Novato, Calif., said bulls could take comfort in the market’s resilience since spring in the face of sharply higher interest rates.
“The bears have tried to take the Dow below 10,000 several times, but they haven’t been successful,” he said. The index is down 3.5% year to date.
“The economy is strong, corporate earnings are growing, and I think people are going to be surprised at how good a Christmas shopping season we see,” Hennessy said.
In the Treasury bond market, where yields have jumped over the last two months on inflation concerns, trading was relatively subdued Friday. The 10-year T-note ended at 4.57%, up from 4.55% on Thursday. The yield had reached a seven-month high of 4.59% on Wednesday.
Although the GDP report made it likely that the Federal Reserve would continue to raise short-term rates, an inflation measure in the report was mild, analysts noted. That may have soothed bond investors somewhat.
Along with the economic news, investors may have been relieved by developments in the CIA leak investigation in Washington, said Steve Todd, editor of the Todd Market Forecast newsletter in Mission Viejo.
I. Lewis “Scooter” Libby, an aide to Vice President Dick Cheney, was indicted on perjury and obstruction-of-justice charges. Top presidential advisor Karl Rove was not charged.
Among the day’s market highlights:
* Energy, real estate and transportation shares helped lead the market higher. The NYSE energy stock index rebounded 2.1%, although oil prices rose only modestly.
* Microsoft gained 68 cents to $25.53, helping lift the tech sector, after reporting third-quarter profit late Thursday that was better than expected.
* Avon Products soared $3.08 to $27.79 after the cosmetics retailer reported better-than-expected third-quarter profit.
* Deckers Outdoor slumped $3.27 to $17.97 a day after the Goleta, Calif.-based maker of footwear under the Teva brand warned that earnings in the current quarter and 2006 would fall short of forecasts.
