US stocks advance after GDP report
NEW YORK Stocks gave up most of an early rally as relief over a better-than-expected reading on the U.S. economy in the third quarter gave way to further questions about corporate profits. A cautious forecast from Exxon Mobil Corp. eroded some of the market’s gains.Still, the market appeared generally relieved after a government report showed the economy contracted in the third quarter by less than expected and after the Federal Reserve’s second interest rate cut in a month. But Exxon said its output in the third quarter declined and the company predicted its capital spending this year will come in at the low end of its forecast.The Commerce Department reported that the nation’s economic output was the weakest since the third quarter of 2001, but it wasn’t as bad a showing as Wall Street had feared. The department said the gross domestic product, the measure of all goods and services produced within the U.S., fell at a 0.3 percent annual rate in the July-September quarter, rather than 0.5 percent as expected.Wall Street had a mixed finish Wednesday after the Fed’s decision to lower its fed funds rate by a half-point to 1 percent. Many investors had hoped the market would build on an 889-point surge in the Dow Jones industrial average on Tuesday. But the buying momentum seemed to reappear Thursday after the GDP report and the Fed’s second interest rate cut since Oct. 8.Michael Strauss, chief economist at Commonfund, said Wall Street was relieved that the GDP figures weren’t worse and that, more broadly, investors are drawing some confidence from the government’s array of efforts to revive the credit markets as boding well for a weak economy.”I think it’s sort of ‘What do you have to do to get someone back from cardiac arrest?’ You have to shock them pretty hard and sometimes you have to shock them a couple of times. I think that’s what going on here,” he said, referring to steps like the Fed’s rate cuts and government cash injections in banks, which began this week.Strauss contends the programs, most of which have yet to take effect, are creating some appetite for snapping up stocks that have been pounded down this month.”I think we’re seeing that transition from ‘don’t buy’ to ‘maybe we buy something,'” he said.In midday trading, the Dow Jones industrial average rose 69.54, or 0.77 percent, to 9,060.50 after rising 276 points in the early going and briefly falling. Exxon, one of the 30 stocks that comprise the Dow, fell $2.86, or 3.8 percent, to $71.79.Broader stock indicators also rose. The Standard & Poor’s 500 index advanced 8.47, or 0.91 percent, to 938.56, and the Nasdaq composite index rose 15.28, or 0.92 percent, to 1,672.49.The Russell 2000 index of smaller companies rose 8.38, or 1.69 percent, to 499.16.Advancing issues outnumbered decliners by about 3 to 1 on the New York Stock Exchange, where volume came to 524.2 million shares.But investors will want to see the gains hold, particularly during the last hour of trading, which has produced many of the market’s recent surges and selloffs. The overall back-and-forth moves on Wall Street have been enormous for more than a month as hedge funds and mutual funds and other professional traders shore up their positions or respond to sell orders.On Wednesday, the Dow rose as much as 298 points in the final minutes of the session before ending down 74.16 points, or 0.82 percent. Analysts variously blamed reports later disputed about a profit forecast at General Electric Co. and investors’ profit-taking. The S&P 500 index fell 1.11 percent, while the Nasdaq composite index rose 0.47 percent.Investors appeared more hopeful Thursday that the Fed’s rate cut will help stimulate a weak economy and add to the government’s other measures to shore up the banking sector and restore confidence among lenders and investors.But investors were still drawn to government debt as some jitters remained. The yield on the three-month Treasury bill, regarded as the safest investment around and an indicator of investor sentiment, fell to 0.46 percent from 0.55 percent Wednesday. A drop in yield indicates an increase in demand. Meanwhile, the yield on the benchmark 10-year Treasury note rose to 3.92 percent from 3.86 percent late Wednesday.Wall Street remains worried about how much the economy will slow and whether the stock market’s pullback adequately accounts for the decrease in corporate profits likely to come. With its advance this week, the market appears more enthusiastic about the likelihood that the economy will sidestep a protracted recession. Though definitions vary, economists often point to back-to-back quarterly declines in GDP. Thursday’s GDP report signals the economy half way to that point.Regardless of whether the economy is in a recession, consumers and investors are feeling the pinch. As the end of October nears, the Dow is down 17.1 percent, having fallen in 16 of the month’s 21 trading days.Investors seemed unfazed by the Labor Department report that the number of people who sought unemployment benefits last week remained unchanged from the previous week at a seasonally adjusted 479,000. Analysts had expected it would come in at 475,000.___On the Net:New York Stock Exchange: http://www.nyse.comNasdaq Stock Market: http://www.nasdaq.com
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