Stocks rose yesterday as encouraging signs of economic growth eased investors' fears of a business slowdown. The Dow Jones industrial average...
NEW YORK — Stocks rose yesterday as encouraging signs of economic growth eased investors’ fears of a business slowdown.
The Dow Jones industrial average rose 79.80 to 10,537.60, its best close since April 7.
Microsoft, one of the 30 Dow stocks, gained 19 cents to close at $25.90 a share. Boeing, also a Dow stock, soared $1.54 to $62.99, a 52-week high, after notching a deal with Singapore Airlines for 20 737s with an option for 20 more.
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Broader stock indicators also moved higher. The Standard & Poor’s 500 index was up 7.61 at 1,197.62, its highest close since March 15. The Nasdaq composite index gained 21.12 to 2,071.24, its highest level since March 8.
The latest reading on gross domestic product (GDP), released by the Commerce Department yesterday, raised hopes that there is enough momentum to maintain economic expansion and job growth in the months ahead.
The economy grew by 3.5 percent in the first quarter of the year — up from a 3.1 percent estimate last month and just slightly less than the 3.6 percent economists had expected. Investors welcomed the report as a sign that the economy was still expanding and inflation risks had lessened.
“The upward revision shows that those concerns were somewhat exaggerated,” said Lynn Reaser, chief economist at Banc of America Capital Management. “The soft patch appears to have been short and fleeting.”
The news also helped minimize the impact of this week’s rise in oil prices, given that energy costs had not dampened first-quarter gross GDP to a great degree. A barrel of light crude settled at $51.01, up 3 cents, on the New York Mercantile Exchange.
“Oil’s going to be slipping and sliding around, but the fact remains it fell nearly $10 from its highs,” said Bryan Piskorowski, market analyst at Wachovia Securities. “It’s injecting a little caution into the market, but otherwise the GDP number didn’t make any waves, kind of in line with what we expected, and we’re getting a bounce off it.”
Analysts said the GDP report could keep the market from suffering another slump, as it did in April when the Dow nearly fell through 10,000. The economy appears to have achieved a balance between economic growth and inflation that makes it likely the Federal Reserve will continue with its plan to raise interest rates gradually.
“The economy turning in good growth, inflation is moderate — that’s a very favorable economic backdrop for the financial markets,” said Richard Rippe, chief economist for the Prudential Equity Group. “The Fed isn’t quite finished raising rates, but there’s nothing in these numbers that say they should get more aggressive in that process.”
Chief economist, Prudential Equity Group