Stocks rallied on Thursday, led by major industrial and financial companies, as oil prices eased and data showed the economy grew more quickly than expected in the second quarter.
All three major indexes rose more than 1 percent after the government said strong export growth helped the gross domestic product — a broad measure of economic activity — expand at a 3.3 percent annual rate between April and June, above an initial estimate of 1.9 percent.
That lifted the fortunes of large industrial companies. Shares of Caterpillar (CAT.N), often described as an economic bellwether, rose more than 3 percent.
A brighter economic outlook coupled with a management shake-up at top U.S. mortgage finance company Fannie Mae (FNM.N) boosted bank shares, which led the broader market’s gains.
“Today’s data on GDP was encouraging, and that is what investors really want to see: a tick up in the economy,” Bruce Zaro, chief technical strategist at Delta Global Advisors in Boston.
James Paulsen, chief investment officer at Wells Capital Management in Minneapolis, said “you hate to be underweight stocks when you have an economy that is performing better than expected.”
The Dow Jones industrial average (.DJI) was up 187.27 points, or 1.63 percent, at 11,689.78. The Standard & Poor’s 500 Index (.SPX) was up 14.45 points, or 1.13 percent, at 1,296.11. The Nasdaq Composite Index (.IXIC) was up 25.76 points, or 1.08 percent, at 2,408.22.
A late morning retreat in the price of oil, of more than $2 sparked a fresh round of stock buying and eased concern about constraints on consumer and business spending.
Earlier, crude jumped above $120 a barrel but fell after the International Energy Agency pledged to help with additional supply if Tropical Storm Gustav damages U.S. oil and natural gas facilities in the Gulf of Mexico.
Financials got a boost from news late on Wednesday that Fannie Mae reshuffled its top management ahead of implementing a plan to preserve capital and cut losses. Shares rose 14 percent at $7.39. Shares of Freddie Mac (FRE.N), the other government-sponsored home finance firm, rose 11,2 percent to $5.28.
The management shake-up “shows that Fannie Mae is trying to get the ship moved in the right direction,” said Arthur Hogan, chief market analyst at Jefferies & Co. in Boston.
MBIA (MBI.N) was the biggest percentage winner among Big Board stocks, jumping 27.1 percent to $15.20 after the bond insurer said on Wednesday it plans to reinsure a $184 billion portfolio of investment-grade U.S. public finance credits.
The S&P Financial Index (.GSPF) rose 3.1 percent.
Shares of heavy equipment maker Caterpillar gained 3.1 percent at $71.74. The stock got a boost when Chief Executive Jim Owens said Caterpillar’s business in China could double by 2010.
The slide in oil hurt energy shares, with an index of energy companies (.GSPE) slipping 1 percent.
Upscale U.S. jeweler Tiffany & Co (TIF.N) shares rose 10.7 percent to $43.87 after it posted a higher-than-expected profit.