By Anora Mahmudova, MarketWatch
NEW YORK (MarketWatch) -- U.S. stocks rallied Friday, lifting
the Dow Jones Industrial Average and the S&P 500 to record
levels, after a government report showed the economy grew at its
fastest pace in two years last quarter.
The U.S. economy expanded at an annual rate of 4.1% in the third
quarter due to stronger consumer spending and business investment
than previously reported, according to newly revised data.
Investors greeted the upward revision to the gross domestic product
as a welcome backdrop for future earnings growth.
The Dow Jones Industrial Average (DJI) closed at a record level
for the third day in a row. The Dow rose 42.06 points, or 0.3%, to
16,221.14 and gained 3% over the week. That was its best week since
September 13. In terms of point gain, it was the best since early
January.
The S&P 500 index (SPX) ended the session off its intraday
highs but still at a record closing level. The benchmark closed
8.72 points, or 0.5%, higher at 1,818.32 and recorded a 2.4% weekly
gain after two straight weeks of losses. The Nasdaq Composite
(RIXF) rallied 46.61 points, or 1.2%, to 4,104.74 and added 2.6%
over the week.
S&P 500 home-builder stocks gained the most over the past
week, rising 6.1%. Industrials and materials sectors added 3.3% and
2.8% in the past five days respectively.
"Now that all the distractions are behind us -- Affordable Care
Act and its botched implementation, the budget debate, debt
ceiling, and this week the Fed--it seems like the markets can
finally focus on fundamentals," said Drew Wilson, investment
analyst at Fenimore Asset Management.
"Today's upward revision to GDP along with earlier economic data
shows that the economy is recovering and it is a big positive for
markets. As multiples are thinly stretched, earnings power will now
come from stronger growth," he added.
Thursday saw a mixed trading session, with the Dow average
closing at its 46th record of the year, while the two other
benchmarks inched lower. Earlier in the week, the U.S. indexes
soared as investors interpreted the Federal Reserve's decision to
begin tapering bond purchases in January as confidence in the
underlying strength of the economy.
* The buzz: MarketWatch's Shawn Langlois writes that the
end-of-week brought quadruple witching, the last trading day for
various options and futures. "So, we might see a pickup in volume
and volatility for what would otherwise be a sleepy time of
year."
* The comment: "If there are any doubts that the Fed made the
right decision on Wednesday to begin tapering, let them be laid to
rest. The final reading for third quarter U.S. GDP came in much
better than expected at 4.1% growth, revised up from 3.6%," Douglas
Coté, chief market strategist at ING U.S. Investment Management,
wrote in a note. "While the Fed was correct to hand the baton over
to the market, it will not be without consequence. The Fed has been
managing market volatility, so anticipate an increase to more
normal levels. However, the economy is strong enough to stand on
its own two feet, and we are winding down 2013 in better shape than
when we began," he added.
In corporate news, several companies reported quarterly results
before the markets open.
* BlackBerry shares initially dropped after the company reported
a bigger a third-quarter loss than expected. However, shares
rallied 15.5% after the firm also announced it had entered into a
five-year strategic partnership with Foxconn to make phones for
Indonesia and other fast-growing markets.
* Walgreen Co. shares fell initially but rebounded to end up
3.7% after the drugstore chain's fiscal first-quarter profit met
estimates. Earnings rose to $695 million, or 72 cents a share, from
$413 million, or 43 cents a share, a year earlier. Chief Executive
Greg Wasson said margins were affected by generics.
* Shares of CarMax Inc. fell 9.4% after the used-car seller's
third-quarter profit missed Wall Street's expectations. Profits
rose to $106.5 million, or 47 cents a share, from $94.7 million, or
41 cents a share, in the year-ago period. Revenue rose to $2.9
billion from $2.6 billion.
* Red Hat Inc. surged 14% after the software firm on late
Thursday said fiscal third-quarter profit rose 50%.
* Shares of Carnival Corp. gained 2.1%, adding to gains from
Thursday when the cruise-line operator reported fourth-quarter
earnings.
In other financial markets
* Chinese stocks closed at 17-week low, while the rest of Asia
was mixed and European stock markets scored the best week since
April.
* Gold rebounded from the previous session's losses and
reclaimed $1,200-an-ounce level, while most metals prices rose. Oil
futures slipped and the dollar fell against most rivals.
More must-reads from MarketWatch:
Witchy volatility, BlackBerry reports and Facebook gets S&P
500'd
U.S. third-quarter growth raised to 4.1%
Lessons from 2013: Stick with your long-term ideas
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