Stocks Close Mostly Higher Following Upbeat GDP Data - U.S. Commentary

(RTTNews) - Stocks moved mostly higher during trading on Friday, benefiting from a positive reaction to upbeat economic data. The gains on the day extended Wednesday's rally, with the Dow and the S&P 500 reaching new record highs. The Nasdaq also reached its best levels since 2000.

The major averages gave back some ground going into the close but still ended the day in positive territory. The Dow rose 42.06 points or 0.3 percent to 16,221.14, the Nasdaq surged up 46.61 points or 1.2 percent to 4,104.74 and the S&P 500 advanced 8.71 points or 0.5 percent to 1,818.31.

For the week, the major averages all showed strong move to the upside. The Dow shot up by 3 percent, while the Nasdaq and the S&P 500 jumped by 2.6 percent and 2.4 percent, respectively.

The strength on Wall Street came on the heels of the release of a report from the Commerce Department showing that the U.S. economy grew faster than previously estimated in the third quarter.

The Commerce Department said gross domestic product increased by an upwardly revised 4.1 percent in the third quarter compared to the 3.6 percent growth estimated earlier this month. Economists widely expected the pace of GDP growth to be unrevised.

The report added to optimism that the economic momentum is strong enough to withstand the Federal Reserve's recently announced decision to begin scaling back its stimulus program.

When announcing its decision to taper its asset purchases by $10 billion per month, the Fed noted that it has seen indications of growing underlying strength in the broader economy.

Sal Guatieri, Senior Economist at BMO Capital Markets, said, "The strong Q3 growth performance vindicates the Fed's decision to begin tapering QE3."

"It also suggests the economy is poised for stronger growth in the new year than the middling 2.0% pace of the past year, meaning the tapering process will continue," he added.

Among individual stocks, shares of Responsys (MKTG) surged up by 40.4 percent after the cloud-based marketing software company agreed to be acquired by Oracle (ORCL) for about $1.5 billion in cash.

Open-source software company Red Hat (RHT) also turned in a strong performance after reporting better than expected third quarter results.

Meanwhile, shares of CarMax (KMX) came under pressure after the used car retailer reported third quarter earnings that came in below analyst estimates.

Sector News

Extending a recent upward trend, computer hardware stocks saw significant strength on the day. The NYSE Arca Computer Hardware Index surged up by 2.3 percent, reaching a new record high.

Seagate Technology (STX) and Lexmark (LXK) turned in two of the hardware sector's best performances, jumping by 6 percent and 3.7 percent, respectively.

Considerable strength was also visible among airline stocks, as reflected by the 2 percent gain posted by the NYSE Arca Airline Index. Republic Airways (RJET) helped lead the sector higher, soaring by 8.7 percent.

Biotechnology stocks also turned in a particularly strong performance on the day, driving the NYSE Arca Biotechnology Index up by 1.8 percent.

Brokerage, networking, software, and housing stocks also moved notably higher, while steel stocks bucked the uptrend by the broader markets.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in yet another mixed performance during trading on Friday. Japan's Nikkei 225 Index edged up by 0.1 percent, while Hong Kong's Hang Seng Index fell by 0.3 percent.

Meanwhile, the major European markets all moved to the upside on the day. While the German DAX Index advanced by 0.7 percent, the French CAC 40 Index and the U.K.'s FTSE 100 Index rose by 0.4 percent and 0.3 percent, respectively.

In the bond market, treasuries regained some ground after coming under pressure over the two previous sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, dropped 3.8 basis points to 2.887 percent.

Looking Ahead

While next week's trading activity is likely to be subdued due to the holiday on Wednesday, reports on personal income and spending, durable goods orders, and new home sales may still attract some attention.