US stocks lifted by GDP data

A better-than-expected reading of the United States’ gross domestic product sent stocks substantially higher for the third straight session today, with the Dow Jones industrial average and Standard & Poor’s 500 index each posting its best close of the year.

Major indexes all finished a turbulent week higher.

Wall Street welcomed the latest GDP data, which showed the economy growing at an annualised rate of 3.% in the fourth quarter, up from last month’s 3.1 % estimate from the Commerce Department and better than economists’ 3.5% forecast.

As stocks rose through the session, investors managed to put aside recent fears of inflation and focus on the growing economy, which should allow the Federal Reserve to continue its policy of regular interest rate hikes without harming companies’ ability to borrow money.

“The lingering fear in the market right now is the Federal Reserve, because they are in a process of moving rates higher, but nobody knows really how far,” said Joseph Keating, chief investment officer at AmSouth Asset Management.

“But if you look at today’s data, for example, you see that the economy is in good shape, fundamentals are sound. What’s not to like about the stock market? We just have to get past these fears.”

According to preliminary calculations, the Dow Jones industrial average rose 92.81, or 0.9%, to 10,841.60. It was the Dow’s best close since December 28, and gave the blue chips a 230.40-point gain, following Thursday’s advance of 75.00 and Wednesday’s 62.59.

Broader stock indicators were moderately higher. The Standard & Poor’s 500 index was up 11.17, or 0.9%, at 1,211.37, its best showing since December 31. The technology-focused Nasdaq composite index gained 13.70, or 0.7%, to 2,065.40. The Nasdaq continues to lag behind the other major indexes and remains down for the year.

Weakness in the dollar and a sharp rise in oil prices above 50 dollars per barrel made for a volatile week on Wall Street, marked by a 174-point tumble in the Dow on Tuesday. Strong economic data helped push the indexes higher toward week’s end, however. All three indexes finished the week higher.

The GDP report helped the dollar gain ground against the euro for the first time this week, though the dollar remained mixed against other currencies. The bond market edged higher on the news, with the yield on the 10-year Treasury note slipping to 4.26 %.

Crude oil futures – which surged earlier this week as the dollar tumbled - fell slightly after the GDP report. A barrel of light crude closed at 51.49dollars, up 10 cents, on the New York Mercantile Exchange.

Oil stocks rallied, resuming their place at the forefront of the market. Exxon Mobil Corp. was up 2.13dollars at 63.26dollars, while ChevronTexaco Corp. added 78 cents to 61.94dollars and ConocoPhilips climbed 2.14dollars to 112.32dollars. All three stocks reached all-time intraday highs in Friday’s trading.

Qwest Communications International Inc fell 34 cents to 3.86dollars after MCI Inc said it would look at Qwest’s improved 8 billion dollars offer, which included a provision to guarantee the stock portion of its bid, but that it was still standing by its 6.7 billion dollars agreement to merge with Dow component Verizon Communications Inc. Verizon climbed 70 cents to 36.20dollars.

MCI lost 21 cents to 22.60dollars after reporting a loss of 10 cents per share for the fourth quarter.

Excluding one-time charges, however, the company beat Wall Street’s profit and revenue forecasts.

The Wall Street Journal reported today that the boards of directors for Federated Department Stores Inc. and May Department Stores Co. would meet in the next few days to finalise Federated’s bid for its struggling rival, valued at more than 10 billion dollars. Federated fell 22 cents to 56.79dollars, while May rose 1.5dollars to 35.35.

In earnings news, The Gap Inc. added a penny to 21.29 after the clothing retailer beat Wall Street’s fourth-quarter profit expectations by 3 cents per share. The company said it would also double its annual dividend.

Department store chain Kohl’s Corp. beat analysts’ forecasts by a penny per share in the fourth quarter, crediting stronger sales and higher margins. Kohl’s gained 1.90dollars to 47.80dollars.

Advancing issues outnumbered decliners by nearly 3 to 1 on the New York Stock Exchange, where volume was moderate. The Russell 2000 index of smaller companies was up 9.97, or 1.6%, at 637.53.