Investors give stocks a modest lift

Investors sent stocks modestly higher in New York today, embracing a sluggish gross domestic product reading that was nonetheless better than expected, hoping that falling oil prices would help spur the economy.

The major indexes all finished the week higher.

The 2.8% GDP growth in the second quarter, a revision from the 3% preliminary figure reported in July, is a far cry from the 4.5% growth in the first quarter.

However, the figure was slightly better than the 2.7% expansion economists had forecast.

That gave investors hope that this week’s drop in oil prices could spark stronger economic growth for the current quarter.

Still, with the Republican National Convention next week and traditionally slow trading in August, volume on the major markets remained extremely low, and any boost in stocks would be seen as tentative at best, analysts said.

“This is really anaemic,” said Chris Johnson, director of quantitative analysis at Schaeffer’s Investment Research in Cincinnati. “That’s letting a bit of volatility come into the market, but so far this week, it’s been on the upside. So when everyone comes back in September, at least we’ll be working in a slightly higher market.”

The Dow Jones industrial average was up 21.60, or 0.2%, at 10,195.01.

Broader stock indicators were modestly higher. The Standard & Poor’s 500 index was up 2.68, or 0.2%, at 1,107.77, and the Nasdaq composite index gained 9.16, or 0.5%, to 1,862.08.

For the week, the Dow gained 0.8%, the S&P was up 0.9% and the Nasdaq rose 1.3%. It was the second straight week of gains for the Nasdaq and the third straight week higher for the Dow and S&P.

Oil prices once again dominated the week’s trading, which was extremely light as most investors stayed out of the market until after the convention.

After oil topped a record 49 per barrel last week, falling prices enticed a few risk-tolerant bargain hunters back into the market. The October contract for light crude settled at 43.18 per barrel, up 8 cents, on the New York Mercantile Exchange on Friday.

Economists said the second quarter GDP growth was hampered by energy costs, which the Commerce Department said kept many consumers from spending as much on goods and services. The GDP growth was also restrained by the nation’s ballooning trade deficit, which showed that what money consumers were spending was heading to overseas companies.

Chattem Inc., maker of consumer healthcare and hygiene products, rose 1.34 to 30.26 after it boosted its third-quarter earnings outlook and reduced its estimate of settlement costs related to class-action lawsuits over its Dexatrim diet pills.

Microchip equipment maker Novellus Systems Inc. lowered its earnings and sales estimates due to low demand, prompting Lehman Brothers to cut its second-half estimates for the company. Novellus was nonetheless up 53 cents at 25.18.

Pharmaceutical company Chiron Corp. tumbled 4.08 to 43.41 after it said deliveries of flu vaccines would be delayed due to contamination issues.

The news led brokerages Deutsche Bank and Robert W. Baird to cut their ratings on the company.

Advancing issues outnumbered decliners by nearly 2 to 1 on the New York Stock Exchange, where volume was very light.

The Russell 2000 index of smaller companies was up 4.42, or 0.8%, at 551.67.