Wall Street extended its advance today after a better-than-expected reading on the nation's economy and a drop in jobless claims gave investors...
NEW YORK — Wall Street extended its advance today after a better-than-expected reading on the nation’s economy and a drop in jobless claims gave investors some reassurance that the economy is holding up.
The Dow Jones industrial average soared 212.67 to close at 11,715.18 following better-than-expected reading on consumer confidence and manufacturing. Still, for the week, stocks are essentially flat after a big decline Monday on credit worries.
Microsoft, one of the 30 Dow stocks, added 38 cents to close at $27.94 a share. Boeing, also a Dow stock, gained $1.82 to $66.34.
Broader stock indicators also rose. The Standard & Poor’s 500 index advanced 19.02 to 1,300.68, and the Nasdaq composite index rose 29.18 to 2,411.64.
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A decline in oil prices also appeared to add force to the rally in stocks. But volume was again light heading toward the Labor Day weekend, a condition that can skew price moves.
The Commerce Department’s report that gross domestic product rose at an annual rate of 3.3 percent for the April-June period helped punctuate a week of generally upbeat economic readings that have left guarded investors somewhat optimistic. The weaker dollar helped boost U.S. exports, which pushed GDP growth beyond the government’s initial estimate of 1.9 percent as well as economists’ forecast of 2.7 percent.
The increase also came as the government handed out rebate checks to taxpayers. It marked the economy’s best performance since the third quarter of last year, when GDP rose at a 4.8 percent pace.
Investors are watching GDP, 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 economy grew at a weak rate of 0.9 percent in the first quarter after shrinking in the last three months of 2007.
Earlier today, the Labor Department said the number of newly laid off people seeking jobless benefits fell for the third straight week. The number of claims dropped to a seasonally adjusted 425,000, down 10,000 from the previous week. That was slightly better than the 427,000 expected by analysts surveyed by Thomson/IFR.
But some economists consider claims above 400,000 an indicator of a slowing economy. Companies have cut jobs every month this year as they grapple with high energy costs and tighter credit.
“We didn’t get a whole lot of new information,” said Charlie Smith, chief investment officer at Fort Pitt Capital Group in Pittsburgh, referring to the reports. He noted that volume was light.
“Exaggerated reactions tend to happen when you have thin trading,” he said.
Bonds fell as investors moved into stocks. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.79 percent from 3.77 percent late Wednesday. The dollar rose against other major currencies, as did gold prices.
“This is an environment in which we’re likely to get a lot of head-fakes both on the upside and the downside,” said Bill Urban, principal with San Francisco-based Bingham, Osborn & Scarborough, referring to economic data. He noted that the initial reading on the fourth quarter last year had been positive before revisions revealed the economy contracted.
“This is just sort of data that trickles out that can be very positive one day and negative the next. We don’t yet think it signals a trend,” he said.
Beyond economic reports, investors are watching oil prices as Tropical Storm Gustav churns toward the Gulf of Mexico on a course that could collide with oil and gas platforms. Oil rose in the early going on concerns about the storm but a strengthening dollar upended oil’s climb.
Light, sweet crude fell $2.56 to settle at $115.59 on the New York Mercantile Exchange.
The decline in oil made energy stocks one of the session’s few areas of weakness.
Government-chartered mortgage companies 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 a government bailout of the companies is in the offing; such a move could wipe out shareholder equity. Fannie Mae rose $1.47, or 22.7 percent, to $7.95, while Freddie Mac rose 53 cents, or 11 percent, to $5.28.