Stocks soar on GDP figure
Stocks barreled higher Thursday after a better-than-expected reading on the gross domestic product gave investors some reassurance that the economy was holding up.
The Dow Jones industrial average jumped more than 200 points. But the rally may have been exaggerated by light trading volume, typical for the week before Labor Day.
Financial stocks surged after a deal between two bond insurers boosted hopes that the credit markets were beginning to right itself.
A decline in oil prices also appeared to benefit stock prices.
The Commerce Department’s report that the economy grew at an annual rate of 3.3% exceeded the 2.7% figure expected on average by economists as well as the government’s initial estimate of 1.9%.
Investors are watching the gross domestic product, considered the best barometer of the economy’s well-being, to look for signs that growth is picking up after being pounded by housing woes and a debilitating credit crisis.
The Dow rose 212.67 points, or 1.8%, to 11,715.18, bringing its three-day rise to nearly 330 points. Still, the blue-chip gauge is up only slightly for the week after a sharp drop Monday on credit worries.
Broader stock indicators also rose Thursday. The Standard & Poor’s 500 index advanced 19.02 points, or 1.5%, to 1,300.68, and the Nasdaq composite index rose 29.18, or 1.2%, to 2,411.64.
The Russell 2,000 index of smaller companies rose 14.84 points, or 2%, to 747.79.
Advancing issues outnumbered decliners by almost 4 to 1 on the New York Stock Exchange.
Government bond yields climbed as investors moved into stocks. The benchmark 10-year Treasury note rose to 3.78% from 3.76% late Wednesday. The dollar gained against most major currencies, while gold advanced.
Oil rose in the early going on concerns about Tropical Storm Gustav as it moved toward installations in the Gulf of Mexico, but a strengthening dollar helped upend crude’s climb.
Oil futures fell $2.56 to $115.59 a barrel on the New York Mercantile Exchange.
The decline in oil made energy stocks the only one of 10 broad industry groups in the S&P; 500 to post a decline. Devon Energy fell $3.62, or 3.4%, to $103.16, while Hess fell $1.61, or 1.5%, to $105.53.
Financial stocks in the S&P; 500 jumped 4.5% after bond insurer MBIA agreed to reinsure nearly $200 billion of municipal bonds backed by privately held FGIC. MBIA soared $4.17, or 35%, to $16.15. Rival bond insurer Ambac Financial Group shot up $2.18, or 42%, to $7.42.
Fannie Mae and Freddie Mac rose for a fourth straight session after Fannie Mae announced a management shake-up and analysts raised further doubts that the mortgage finance giants would have to be bailed out by the government. Fannie Mae climbed $1.47, or 23%, to $7.95, while Freddie Mac increased 53 cents, or 11%, to $5.28.
Among retailers, Tiffany jumped $4.24, or 11%, to $43.85 after reporting that its second-quarter profit doubled as sales jumped in Asia and Europe.
Zale forecast a fiscal 2009 profit that topped Wall Street’s expectations. The jeweler soared $4.77, or 21%, to $27.92.
Stocks rose sharply in European markets. Key indexes climbed 1.3% in Britain, 1.6% in Germany and 2% in France. Shares in Japan rose 0.1%.