Stocks move higher after 2nd-quarter GDP revision isn’t as bad as feared; Bonds fall

Not-bad news on GDP growth sends stocks higher

NEW YORK — Stocks rose Friday and bond prices fell after the government reported that U.S. economic growth didn’t slow as much as feared.

Comments from Ben Bernanke also helped send stocks higher. The Federal Reserve chairman, speaking at the central bank’s annual conference, reaffirmed his outlook for economic growth next year and said the Fed was ready to take extra steps to stimulate the economy if needed.

Stocks stumbled briefly after Intel Corp. lowered its revenue estimate but then resumed their upward march. The Dow Jones industrial average and other market barometers all gained more than 1 percent.

The downward revision in second-quarter economic growth was steep, but not quite as bad as economists expected. That helped encourage investors to take money out of safe investments like Treasurys and put it to work in the stock market. Yields on Treasurys, which help set interest rates on loans like mortgages, rose sharply as their prices fell.

The Commerce Department reported that gross domestic product grew at a 1.6 percent rate in the April-to-June period. That’s still way down from its earlier estimate of 2.4 percent but not as bad as the 1.4 percent expected by economists.

Shares of Intel were halted as the chip giant said it would miss its revenue expectations for the current quarter, but there too the news wasn’t as bad as it could have been. Intel’s shares edged higher after resuming trading since the company’s new forecast wasn’t as bad as the worst estimates circulating among analysts.

Overall, it was a day of bad news that could have been worse.

“These are terrible numbers,” Kim Caughey, equity research analyst at Fort Pitt Capital Group in Pittsburgh, said of the lower GDP revision. “But they weren’t frighteningly horrible.”

The Dow Jones industrial average rose 125.10, or 1.3 percent, to 10,110.91 in afternoon trading. The Standard & Poor’s 500 Index rose 12.99, or 1.2 percent, to 1,060.21 and the Nasdaq composite index rose 25.27, or 1.2 percent, to 2,143.96.

Rising stocks outnumbered falling ones five to one on the New York Stock Exchange, where volume came to 610 million shares.

The yield on the 10-year Treasury note rose to 2.64 percent, well above the 2.50 percent it was trading at before the GDP numbers came out. Its price fell $1.375 to $99.844.

The Dow closed below 10,000 Thursday, the first time since early July that it finished under that milestone. Investors have been generally pessimistic about the economy in the past few weeks, but stock moves have also been skewed because many traders are on vacation.

The upturn in stocks on Friday marked an improvement in sentiment from much of August. Stocks have been mainly falling since Aug. 9 on a series of weak indicators on the economy, including weak home sales figures.

Bernanke, who was giving a speech at the central bank’s annual conference, repeated his assessment that the U.S. economic recovery remains fragile, but he didn’t downgrade his already cautious view. Investors have been on edge about the economy in recent weeks, and some fear that in the worst case, the U.S. economy could slip back into recession, something economists call a “double-dip.”

“The market had been bracing for Bernanke to say that a double-dip is imminent or at least he would downgrade the economy,” said Quincy Krosby, market strategist for Prudential Financial.

A heated-up bidding war between Dell Inc. and Hewlett-Packard Co. also helped to lift shares. The big computer makers are battling to control the data-storage company 3Par Inc. HP fired the latest salvo early Friday, raising its bid for 3Par to $1.88 billion, topping Dell’s latest offer by 11 percent.

3Par shares rose $6.39 to $32.42, above HP’s latest offer of $30 per share and a sign that investors are hopeful for another counteroffer from Dell. Dell’s initial bid for 3Par last week was $18 per share.

Intel was up 26 cents at $18.44.

European shares also moved higher after the better-than-expected figures on U.S. economic growth came out. European shares also got a lift after the Britain raised its estimate of second-quarter economic growth to 1.2 percent from 1.1 percent.

In London, the FTSE-100 index rose 0.9 percent, while the DAX 0.7 percent and the CAC-40 in Paris rose 0.9 percent. In Asia, Japan’s Nikkei 225 closed up 1 percent.