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Economic upswing sends Dow soaring

Stocks rally after a major indicator shows the economy is healthy despite the hurricanes.

NEW YORK - Stocks rallied sharply Friday, with the Dow gaining 172 points on better-than-expected gross domestic product growth last quarter despite the disruptions caused by hurricanes Katrina and Rita. The major indexes finished an erratic week higher.

The upswing in economic activity for the July-September quarter soothed a market anxious for signs of the economy's health amid fears of a downturn. The GDP figure also overshadowed a drop in consumer confidence and a weak forecast from oil company Chevron Corp.

"It basically drove home the point that the economy was healthy before the hurricanes and indeed may have remained healthy afterward as well," said Doug Porter, a senior economist at BMO Nesbitt Burns, who noted gains in spending and business investment among increases in nearly every GDP component in the Commerce Department's report.

The Dow Jones industrial average jumped 172.82, or 1.69 percent, to 10,402.77, its biggest one-day gain since April 21.

Broader stock indicators were also higher. The Standard & Poor's 500 index gained 19.51, or 1.65 percent, to 1,198.41, and the Nasdaq composite index climbed 26.07, or 1.26 percent, to 2,089.88.

Bonds declined as stocks rose, with the yield on the 10-year Treasury rising to 4.57 percent from 4.55 percent late Thursday. The dollar was higher against most major currencies, while gold prices inched upward.

Oil traded in a narrow range despite fears that recovering Gulf Coast facilities will struggle with heating oil demand as winter makes an early approach. A barrel of light crude rose 13 cents to settle at $61.22 on the New York Mercantile Exchange.

Wall Street closed out a week of volatile trading as investors juggled mixed corporate earnings reports and renewed interest-rate worries after the nomination of top White House economist Ben Bernanke as the next Federal Reserve chief.

Bernanke, who would replace outgoing chairman Alan Greenspan in January, is largely expected to keep the Fed's mission of clamping inflation by slowly lifting interest rates and curbing demand. But with oil and gas prices retreating from record levels, many fear the Fed may go overboard and send the economy sliding.

For the week, the Dow added 1.84 percent, the S&P 500 rose 1.6 percent and the Nasdaq finished 0.37 percent higher.

Friday's positive GDP report gave investors a brighter economic picture. The Commerce Department said the economy grew 3.8 percent in the third quarter, besting economists' forecast for a 3.6 percent gain and the 3.3 percent advance for the April-June period.

That growth helped the market look past weakening consumer confidence after the University of Michigan reported its consumer sentiment index for October sank 1.2 points to 74.2, below views for an increase to 76.

Mike Viracola, managing director at Adams Harkness, also attributed this week's volatility to stock-specific moves as traders used earnings data as catalysts to boost returns before year-end.

"I don't think (investors) are getting that much from the individual earnings reports," Viracola said, that would cause them to switch gears in their long-term positions.

[Last modified October 29, 2005, 01:44:11]