Wall Street rose for a second straight session Wednesday after the government’s latest gross domestic product reading showed the economy was in better shape than expected.
NEW YORK (AP) — Wall Street rose for a second straight session Wednesday after the government’s latest gross domestic product reading showed the economy was in better shape than expected, easing concerns that growth was moderating too sharply. The Dow Jones industrials rose 90 points.
Investors were upbeat after a series of reports, including GDP, pointed to the likelihood of an economic soft landing after more than two years of interest rate hikes that ended in June. Major stock indexes held on to gains throughout the session even as oil prices moved to their highest levels in two months.
Providing ballast was the Commerce Department’s report that GDP expanded at a 2.2 percent annual rate, topping its previous estimate of 1.6 percent and economists’ projections for a 1.8 percent gain. Meanwhile, the Federal Reserve said in its beige book report that most areas of the U.S. had moderate economic growth in the first few weeks of November as consumer spending grew.
Wall Street appears to be in a consolidation phase after its big rally the past two months. The fact that it has rebounded rather than extending Monday’s plunge, when the Dow fell 158 points, indicates many investors want to keep buying although they’re watching closely for any signs of economic trouble.
“The most recent data confirms the basic picture we’ve seen for some months is that it looks like we’re heading toward a soft landing, inflationary pressure is easing, and that the housing market hasn’t collapsed as some feared,” said Ed Keon, chief investment strategist with Prudential Equity Group. “Soft landings, when we’ve had them, are great for stocks.”
According to preliminary calculations, the Dow rose 90.28, or 0.74 percent, to 12,226.73. The Dow rose 14.74 Tuesday.
Broader stock indicators also advanced. The Standard & Poor’s 500 index was up 12.76, or 0.92 percent, at 1,399.48, and the Nasdaq composite index added 19.62, or 0.81 percent, to 2,432.23.
The pair of economic reports also indicated the housing slump hasn’t been too much of a drag on the economy, and offset a Commerce Department report released Wednesday that showed new home sales in October suffered their largest drop since July.
Another beneficiary of the healthy economic snapshot was the dollar, which rebounded from a 20-month low against the euro but was mixed against other major currencies. Gold prices moved higher.
Data that suggests the Fed is keeping a handle on the economy rattled the fixed-income markets. Bonds declined, with the yield on the benchmark 10-year Treasury note higher at 4.52 percent from 4.50 percent late Tuesday. Signs of economic strength keep pressure on policy makers to continue lifting interest rates.
All of this economic news comes one day after Fed Chairman Ben Bernanke said U.S. growth will pick up next year. He said Fed policy makers, who meet again Dec. 12, would not hesitate to raise interest rates further if inflation remained a risk.
“The comments by Bernanke were really to help keep the dollar up there,” said Alexander Paris, president of Chicago-based Barrington Research. “Really, the dollar has been the most disturbing factor out there since it began to fall last Friday.”
Leading stocks higher were energy companies, which advanced after weekly supply data showed U.S. inventories fell more than expected. This pushed a barrel of light sweet crude up $1.47 to $62.46 on the New York Mercantile Exchange.
Exxon Mobil Corp. rose $1.87, or 2.5 percent, to $76.03. However, transport stocks fell on the potential for higher fuel. Trucking company Ryder Systems Inc. fell $1.16, or 2.2 percent, to $52.73.
Jewelry retailer Tiffany & Co. helped lead the S&P 500 after it reported third-quarter profit grew a stronger than expected 23 percent as U.S. customers increased spending. The luxury goods retailer also raised fiscal 2006 guidance. Shares of the company surged $2.29, or 6.4 percent, to $38.22.
Also leading the S&P was New York Times Co., which rose $1.73, or 7.5 percent, to $24.76. The publisher surged on a report that former American International Group Inc. Chairman Maurice “Hank” Greenberg might be interested in making a takeover bid. Earlier reports indicated that Greenberg has been considering an acquisition of Tribune Co., which owns the Los Angeles Times and Chicago Tribune.
Pfizer Inc., the world’s largest drugmaker, fell 2 cents to $27.07 after it announced plans to cut 20 percent of its U.S. sales force, or about 2,200 jobs. The move is part of a cost-cutting program to transform the company into a more nimble organization as it struggles with sluggish sales.
Ford Motor Co. rose two cents to $8.17 after the second-largest U.S. automaker said about 38,000 of its hourly production workers accepted buyouts or early retirement as part of its restructuring. Ford announced Sept. 15 plans to reduce its North American hourly work force by 25,000 to 30,000.
Apple Computer Inc. fell by a penny to $91.80 as investors took profits after Bear Stearns said the company will see increasing demand for its Macintosh computers and iPod music players. The stock hit a new all-time high of $93.16 Monday, following news of strong Thanksgiving weekend sales.
The Russell 2000 index of smaller companies was up 9.34, or 1.21 percent, at 784.16.
Advancing issues outnumbered decliners by almost 3 to 1 on the New York Stock Exchange, where volume came to 1.56 billion shares compared to 1.59 billion at the same point on Tuesday.
European shares broke a five-session losing streak, with Britain’s FTSE 100 up 0.97 percent, Germany’s DAX index up 1.31 percent, and France’s CAC-40 adding 1.41 percent. European indexes have been under pressure in recent sessions as shares in exporters were hit by a weaker dollar.
Japan’s Nikkei stock average closed up 1.39 percent.