GDP Report Boosts Stocks

Stocks rose Thursday as encouraging signs of economic growth eased investors’ fears of a business slowdown. Small-stock indexes posted the day’s best gains, as investors continued to show less aversion to risk taking.

Among larger stocks, home builders including Toll Bros. and computer chip makers such as Intel led the gains.

U.S. gross domestic product, the broadest measure of the economy, grew at a 3.5% annual rate in the first quarter, the Commerce Department said. The figure was an improvement from the government’s initial estimate of 3.1% growth.

Investors welcomed the report as a sign that the economy was in good shape. The Dow Jones industrial average rose 79.80 points, or 0.8%, to 10,537.60, its best close since April 7.

Among broader indexes, the Standard & Poor’s 500 was up 7.61 points, or 0.6%, to 1,197.62, its highest close since March 15.

The technology-heavy Nasdaq composite gained 21.12 points, or 1%, to 2,071.24, its highest level since March 8.

Small-stock indexes surged. The Russell 2,000 jumped 8.30 points, or 1.4%, to 614.70. It has risen 6.9% from the 2005 low it reached April 28. By contrast, the S&P; 500 is up 5.3% from its 2005 low reached April 20.

Advancing issues outnumbered decliners by nearly 9 to 4 on the New York Stock Exchange on Thursday.

The market’s rebound since late April has been fueled by lower oil prices and upbeat economic data, including a benign report last week on inflation in April.

“This rally can continue and it will continue,” said Mark Kajita, chief investment officer at Baker Boyer Bancorp in Walla Walla, Wash. “The fundamentals are behind the economy to move ahead very strongly.”

The upward GDP revision helped minimize the effect of this week’s rebound in oil prices, analysts said. A barrel of crude settled at $51.01, up 3 cents, on the New York Mercantile Exchange.

“Oil’s going to be slipping and sliding around, but the fact remains it fell nearly $10 from its highs,” said Bryan Piskorowski, an analyst at Wachovia Securities.

Stocks also were buoyed Thursday as the bond market remained calm despite the stronger GDP report. The yield on the 10-year Treasury note was unchanged at 4.08%, and yields on corporate junk bonds continued to slide from their recent highs.

Although several Federal Reserve officials indicated Thursday that the central bank intended to continue raising short-term interest rates, they also said the pace should remain “measured” -- which gives Wall Street a high degree of comfort, analysts said.

The dollar gained against most currencies amid the strong economic news. The euro fell to $1.251, a 2005 low against the dollar, as pessimism over the European economy weighed on the 12-nation currency.

By comparison, “The [U.S.] economy turning in good growth, inflation is moderate -- that’s a very favorable economic backdrop for the financial markets,” said Richard Rippe, economist at Prudential Equity Group.

In other market highlights:

* Toll Bros. triggered a rally in home builder stocks after it said fiscal 2005 profit would climb 70% from the previous year, up from its February forecast of 60%. Toll gained $5.92 to a record $91.65. Pulte Homes, the No. 2 U.S. home builder, added $3.12 to $76.32. KB Home added $2.33 to $66.35.

* A gauge of semiconductor-related companies added 1.7% for the second-best performance among 24 industry groups in the S&P; 500. Market research firm IC Insights said 2005 industry sales would rise 4% because of better-than-expected global economic growth and falling customer inventories. Intel climbed 37 cents to $27.37, Texas Instruments added 46 cents to $27.95 and Xilinx rose 50 cents to $28.50.

* Many industrial issues rallied on the GDP news. Nucor gained $1.73 to $52.83, Black & Decker added $1.27 to $86.72, Caterpillar jumped $1.96 to $94.43 and Boeing was up $1.54 to $62.99.

* Energy stocks also were higher. Southwestern Energy surged $2.52 to $69.95, Occidental Petroleum gained $1.20 to $72.69 and Exxon Mobil climbed 54 cents to $56.22.

* Calpine, the San Jose-based owner of power plants in 21 states, advanced for a second day after it announced plans to accelerate $3 billion in debt reduction. Calpine added 20 cents, or 7.6%, to $2.84.

* Rising pork and beef prices ate into Hormel Food’s quarterly earnings. The maker of Spam reported a modest 4% rise in profit after one-time charges, missing Wall Street’s profit forecasts by 2 cents a share. Hormel tumbled $2.67, or 8.2%, to $30.08.