GDP report drives stocks higher after 4-day slide

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

The Commerce Department's report Thursday that gross domestic product rose at an annual rate of 3.5 percent in the third quarter is the surest sign yet that the recession has ended , even though problems such as unemployment and weak consumer spending remain.

The strong GDP report is weakening demand for safe-haven assets like Treasurys. A drop in the dollar is pushing commodity prices higher, helping to boost energy and materials stocks.

At midday, the Dow Jones industrial average is up 101 at 9,864. The Standard & Poor's 500 index is up 13 at 1,055, and the Nasdaq composite index is up 27 at 2,087.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.

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 the economy is healing, even though problems such as high unemployment and weak consumer spending persist.

The strong GDP report helped to weaken demand for safe-havens like Treasurys. A drop in the dollar pushed commodity prices higher, which helped materials and energy stocks.

The growth came in ahead of the 3.3 percent rise forecast by economists polled by Thomson Reuters. The expansion in GDP was the best in two years and broke four consecutive quarters of declines, the strongest sign yet that the worst recession since the 1930s is over.

The economy was bolstered by government stimulus programs, including the popular Cash for Clunkers auto rebates and tax credits for first-time home buyers. Some analysts worried that the expiration of many of those measures could make it hard to keep GDP growing.

"The question is will it get back on its own sound footing or will it continue to hobble," said Wyatt Crumpler, vice president of asset management at American Beacon Advisor Inc. in Fort Worth, Texas. "We're a bit pessimistic in the short-term."

Crumpler predicts the economy will struggle as consumers try to pay down debt and as credit for small businesses remains tight.

In late morning trading, the Dow Jones industrial average rose 95.45, or 1 percent, to 9,858.14. The Standard & Poor's 500 index rose 13.43, or 1.3 percent, to 1,056.06, while the Nasdaq composite index rose 29.86, or 1.5 percent, to 2,089.47.

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," Schlesinger 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.

Other economic news was mixed. 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.

Bond prices fell, pushing their yields higher. The yield on the benchmark 10-year Treasury note rose to 3.49 percent from 3.42 percent late Wednesday.

The dollar mostly fell, while gold prices rose.

Crude oil rose $1.98 to $79.44 per barrel on the New York Mercantile Exchange.

Five stocks rose for every one that fell on the New York Stock Exchange, where volume came to 422.1 million shares compared with 486.2 million shares traded at the same point Wednesday.

The Russell 2000 index of smaller companies rose 11.96, or 2.1 percent, to 578.32.

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