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NEW YORK - Modest growth in the gross domestic product and a drop in oil prices gave Wall Street its best day of 2005 on Wednesday as investors at least temporarily set aside inflation fears and picked up bargains in a heavily sold-off market. The Dow Jones Industrial average gained more than 135 points.
According to the Commerce Department, fourth-quarter GDP grew at an annual rate of 3.8 percent, less than the 4 percent economists forecast. The department's price index rose 2.9 percent for the quarter, more than Wall Street expected, but was offset by increases in consumer spending and capital expenditures by businesses.
Along with an upbeat report on the nation's oil reserves, the GDP report prompted Wall Street's strongest day of 2005 on heavy volume. All three major indexes saw their biggest one-day point gains since Dec. 1.
"Normally you wouldn't see this GDP report as a good thing, but with inflation out there, a little bit less growth is viewed as a positive," said Larry Peruzzi, senior equity trader at the Boston Company Asset Management. "It cools things down just enough, without getting too cold."
The Dow rose 135.23, or 1.3 percent, to 10,540.93.
Broader stock indicators also gained ground. The Standard & Poor's 500 index was up 16.05, or 1.38 percent, at 1,181.41. The Nasdaq composite index gained 31.79, or 1.61 percent, to 2,005.67, after falling to a five-month low Tuesday. The Nasdaq closed above the psychologically important 2,000 mark for the first time since March 21.
The drop in oil prices came after the Energy Department reported a 5.4-million barrel increase to the nation's crude oil reserves. Light, sweet crude futures were down 24 cents at $53.99 per barrel on the New York Mercantile Exchange, though oil prices had fallen as low as $52.50 per barrel earlier in the session.
The dollar fell against most major currencies, while gold prices rose. Investors were also looking ahead to a pair of economic reports Friday - the Labor Department's March employment figures and the Institute for Supply Management's monthly report on the industrial sector.
Economic data, particularly employment data, has been closely watched as the Federal Reserve plots its rate-tightening policy, and Wall Street is eager to know whether the next hike will be a 0.25 percentage point move like all the others, or a more aggressive half-point rise.