Stocks surge on economic growth

? A better-than-expected reading of the nation’s gross domestic product sent stocks substantially higher for the third straight session Friday, with the Dow Jones industrial average and Standard & Poor’s 500 index each posting its best close of the year. The major indexes all finished a turbulent week higher.

Wall Street welcomed the latest GDP data, which showed the economy growing at an annualized rate of 3.8 percent in the fourth quarter, up from last month’s 3.1 percent estimate from the Commerce Department and better than economists’ 3.5 percent forecast.

As stocks rose through the session, investors managed to put aside recent fears of inflation and focus on the growing economy, which should allow the Federal Reserve to continue its policy of regular interest rate hikes without harming companies’ ability to borrow money.

“The lingering fear in the market right now is the Federal Reserve, because they are in a process of moving rates higher, but nobody knows really how far,” said Joseph Keating, chief investment officer at AmSouth Asset Management. “But if you look at today’s data, for example, you see that the economy is in good shape, fundamentals are sound. What’s not to like about the stock market? We just have to get past these fears.”

The Dow rose 92.81, or 0.86 percent, to 10,841.60. It was the Dow’s best close since Dec. 28 and gave the blue chips a three-day gain of 230.40, following Thursday’s advance of 75.00 and Wednesday’s 62.59.

Broader stock indicators were moderately higher. The S&P was up 11.17, or 0.93 percent, at 1,211.37, its best showing since Dec. 31. The technology-focused Nasdaq composite index gained 13.70, or 0.67 percent, to 2,065.40. The Nasdaq continues to lag behind the other major indexes and remains down for the year.

Weakness in the dollar and a sharp rise in oil prices above $50 per barrel made for a volatile week on Wall Street, marked by a 174-point tumble in the Dow on Tuesday. Strong economic data helped push the indexes higher over the past three sessions, however. For the week, the Dow rose 0.52 percent, the S&P was up 0.84 percent and the Nasdaq climbed 0.33 percent.

The GDP report helped the dollar gain ground against the euro for the first time this week, though the dollar remained mixed against other currencies. The bond market edged higher on the news, with the yield on the 10-year Treasury note slipping to 4.26 percent.

Crude oil futures — which surged earlier this week as the dollar tumbled — fell slightly after the GDP report. A barrel of light crude closed at $51.49, up 10 cents, on the New York Mercantile Exchange.

Oil stocks rallied, resuming their place at the forefront of the market. Exxon Mobil Corp. was up $2.13 at $63.26, while ChevronTexaco Corp. added 78 cents to $61.94 and ConocoPhilips climbed $2.14 to $112.32. All three stocks reached all-time intraday highs in Friday’s trading.

“You’ve seen energy stocks taking off while technology stocks have been lagging since mid-December,” said Ken Tower, chief market strategist for Schwab’s CyberTrader. “I think if energy stocks are going to lead the market, then tech stocks won’t be. Energy stocks represent higher consumer prices, and that will cause technology stocks to suffer.”

Qwest Communications International Inc. fell 34 cents to $3.86 after MCI Inc. said it would look at Qwest’s improved $8 billion offer, which included a provision to guarantee the stock portion of its bid, but that it was still standing by its $6.7 billion agreement to merge with Dow component Verizon Communications Inc. Verizon climbed 70 cents to $36.20.

MCI lost 21 cents to $22.60 after reporting a loss of 10 cents per share for the fourth quarter. Excluding one-time charges, however, the company beat Wall Street’s profit and revenue forecasts.

The Wall Street Journal reported Friday that the boards of directors for Federated Department Stores Inc. and May Department Stores Co. would meet in the next few days to finalize Federated’s bid for its struggling rival, valued at more than $10 billion. Federated fell 22 cents to $56.79, while May rose $1.50 to $35.35.

In earnings news, The Gap Inc. added a penny to $21.29 after the clothing retailer beat Wall Street’s fourth-quarter profit expectations by 3 cents per share. The company said it would also double its annual dividend.

Department store chain Kohl’s Corp. beat analysts’ forecasts by a penny per share in the fourth quarter, crediting stronger sales and higher margins. Kohl’s gained $1.90 to $47.80.

Advancing issues outnumbered decliners by more than 3 to 1 on the New York Stock Exchange, where preliminary consolidated volume came to 1.92 billion, compared with 1.9 billion on Thursday.

The Russell 2000 index of smaller companies was up 9.97, or 1.59 percent, at 637.53.

Overseas, Japan’s Nikkei stock average rose 1.1 percent. In Europe, Britain’s FTSE 100 closed up 0.7 percent, France’s CAC-40 climbed 1.43 percent for the session, and Germany’s DAX index gained 1.03 percent.