Stocks rise in early trading after GDP report

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NEW YORK (AP) -- Investors heartened by news of a stronger-than-expected economy went back into the stock market after a four-day slide.

The Commerce Department's report Thursday that the gross domestic product rose at an annual rate of 3.5 percent in the third quarter gave the surest sign yet that the recession has ended and that the economy is healing, although problems remain.

The reassurance weakened demand for safe-havens like Treasurys. That, in turn, gave a boost to stocks. A drop in the dollar pushed commodity prices higher, which helped materials and energy stocks.

The GDP increase was faster than the 3.3 percent increase predicted by economists polled by Thomson Reuters. The growth was the best in two years and stops four consecutive quarters of declines that had pushed the economy into its worst recession since the Great Depression.

The economy was bolstered by government stimulus programs, including the popular Cash for Clunkers auto program and tax credits for first-time home buyers. Those programs did raise some questions in the market about the sustainability of the GDP increase.

In midmorning trading, the Dow Jones industrial average rose 90.61, or 0.9 percent, to 9,853.30. The Standard & Poor's 500 index rose 11.85, or 1.1 percent, to 1,054.48, while the Nasdaq composite index rose 23.42, or 1.1 percent, to 2,083.03.

Mitch Schlesinger, a managing partner at FBB Capital Partners in Bethesda, Md., said that because of government support, fourth-quarter GDP should provide a better picture of how much the economy has recovered.

"Some of the artificial goosing of the numbers will come out and we'll get a better picture," ! Schlesin ger said. He added that the economy is likely to grow in the fourth quarter, but probably not at as fast a pace as the third quarter.

In the interim, however, investors will welcome the better-than-expected third quarter report, he said.

Not all the news was upbeat. The number of people claiming jobless benefits for the first time dropped less than expected last week. The Labor Department said workers filing first-time claims for unemployment dipped 1,000 to a seasonally adjusted 530,000 last week. Economists expected a larger decline to 521,000.

However, the number of people receiving unemployment benefits on an ongoing basis dropped sharply by 148,000 to 5.8 million, below economists' expectations.

Investors were also watching testimony by Treasury Secretary Timothy Geithner to the House Financial Services Committee. Geithner told lawmakers the government isn't looking to bail out struggling financial companies, and said legislation being considered by the committee would ensure that firms of any size could fail without risking a collapse of the financial markets.

Meanwhile, bond prices fell, which pushed yields higher. The yield on the benchmark 10-year Treasury note rose to 3.47 percent from 3.42 percent late Wednesday.

The dollar mostly fell against other major currencies, while gold prices rose.

Crude oil rose $1.09 to $78.55 per barrel on the New York Mercantile Exchange.

Three stocks rose for every one that fell on the New York Stock Exchange, where volume came to 197.9 million shares compared with 178.1 million shares traded at the same point Wednesday.

The Russell 2000 index of smaller companies rose 7.53, or 1.3 percent, to 573.89.

Overseas, Japan's Nikkei stock average fell 1.8 percent. In afternoon trading, Britain's FTSE 100 rose 0.7 p! ercent, Germany's DAX index gained 1.2 percent, and France's CAC-40 jumped 1.2 percent.

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