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Stocks rise in early trading after GDP report

October 30, 2009|Associated Press

NEW YORK — Stocks logged their best day in three months Thursday as investors rushed into the market on word that the economy grew faster than expected during the summer.

The Dow Jones industrial average jumped almost 200 points to recoup nearly all its losses for the week, while demand wilted for holdings valued for their relative safety.

The report that the U.S. gross domestic product rose at an annual rate of 3.5% in the third quarter reinvigorated investors who had dumped stocks for much of the week on troubling signs in the housing market and a disappointing report on consumer confidence.

The economy's growth in the latest three-month period was the strongest in two years and broke four straight quarters of declines. The report was the best indication yet that the longest recession since the Great Depression has ended.

Many analysts cautioned that it would be hard to sustain expansion at the same rate, in part because the economy benefited in the third quarter from government stimulus programs including the popular "cash for clunkers" auto rebates and tax credits for first-time home buyers.

But such concerns were pushed aside Thursday.

The Dow Jones industrial average rose 199.89 points, or 2%, to 9,962.58. It was the best day for the Dow since July 15.

The broader Standard & Poor's 500 index surged 23.48 points, or 2.3%, to 1,066.11, while the Nasdaq composite index jumped 37.94 points, or 1.8%, to 2,097.55.

More than four stocks rose for every one that fell on the New York Stock Exchange.

Motorola climbed 9.8% after the cellphone maker forecast fourth-quarter profit higher than analysts had expected.

Demand shrank for Treasury bonds, lifting their yields, as investors rediscovered their affection for risk. The yield on the 10-year T-note rose to 3.50% from 3.40% late Wednesday.

Also reflecting a reversal of a flight to safety, the dollar's value against a basket of six other major currencies fell 0.7% after five straight days of gains.

The weaker dollar made commodities more attractive for foreign buyers. Gold rose $16.50 to $1,046.40 an ounce, while crude oil shot up $2.41 to settle at $79.87 a barrel.

Overseas, key stock indexes rose 1.1% in Britain, 1.7% in Germany and 1.4% in France. Shares in Japan fell 1.8%.

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