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msnbc.com
updated 3/26/2004 8:53:41 AM ET 2004-03-26T13:53:41

A solid reading on the health of the economy gave Wall Street some badly needed reassurance Thursday, sparking a spate of stock-buying that drove the Dow Jones industrial average to its biggest one-day gain in six months after five straight down days.

Major Market Indices

Before the open, the Commerce Department confirmed earlier estimates that gross domestic product, or GDP, a widely-followed barometer of the country’s overall economic health, grew at a solid 4.1 percent annual rate during the last quarter of 2003 , meeting economists’ estimates.

“There was no downward revision to the GDP number and that’s really lighting a fire under this market,” said Peter Cardillo, chief market strategist at S.W. Bach, a retail brokerage in New York.

Cardillo added that he thinks the market is moving up from an oversold condition after a corrective phase that has lasted for about nine weeks, as a number of factors have weighed on the market, ranging from high stock valuations to fears about global terrorism.

Alfred E. Goldman, chief market strategist with A.G. Edwards Inc. in St. Louis, agreed.

“We think the correction has probably done its dastardly deed and the primary trend remains up,” Goldman said. “The outlook for the economy remains positive; the forecasts for corporate earnings are up ... I would advise people who are on the sidelines to do some selective buying.”

The Dow Jones industrials closed the day up 170.59 points, or 1.7 percent, posting its biggest percentage rise in six months after five days of losses. The broader Standard & Poor’s 500-stock index finished 17.86 points higher, or up 1.6 percent, registering its biggest daily percentage gain since the beginning of October.

The technology-loaded Nasdaq composite index jumped 57.69 points, or 3 percent, seeing its biggest daily percentage gain in nine months after closing last Tuesday at a new 2004 low. The index has born the brunt of the market's recent decline, and is rebounding more sharply than the Dow average, analyst said.

Buyers snapped up shares in trampled-down sectors. Semiconductor shares rallied, sending the Philadelphia Stock Exchange’s semiconductor index up nearly 4 percent and lifting other technology stocks, after some positive earnings news in the sector. Airline stocks also rebounded strongly, helped by falling crude oil prices.

Analysts expect the economy to grow at a rate of 4.5 percent through the first half of the year as tax incentives motivate consumers and businesses to spend and invest more. But some say that level of growth may not be sustainable if the labor market doesn’t improve dramatically.

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Job growth has been painfully slow despite better economic activity. A weekly report from the Labor Department early Thursday showed that new claims for unemployment benefits rose last week by a seasonally adjusted 1,000 to 339,000.

There was nothing in the day’s news to suggest the pace of the recovery is accelerating, however, which led some analysts to question what was fueling the advance.

“You’re having a good day today, but whether it’s just bargain-hunting or whether it suggests longer term conviction, I think it’s too early to say,” said Ken Tower, chief market strategist for Schwab’s CyberTrader. “I think everyone is waiting for next week’s jobs numbers.”

Many on Wall Street are taking cautious positions ahead of the government’s March jobs report, due at the end of next week. Investors were painfully disappointed when only 21,000 jobs were added in February.

Technology bellwethers Intel and Microsoft helped to drive the Dow higher. Intel rose 4.8 percent to $27.79, while Microsoft advanced 3.2 percent to $25.19. They also gave positive momentum to the Nasdaq Composite and topped the Nasdaq’s list of most-active shares.

(MSNBC is a Microsoft-NBC joint venture.)

Video game publisher Activision’s stock jumped 11.2 percent to $15.14 after the company boosted its fourth-quarter financial outlook to a profit instead of a forecast loss due to better-than-expected performance in its publishing and distribution divisions.

Nokia rose 3 percent to $20.13 after the company announced plans to introduce 40 new phone models this year, and add research and development staff in an effort to meet rising global demand.

And Micron Technology fell 1.6 percent to $15.56 after reporting a second quarter loss after the market closed Wednesday. The memory chip maker has failed to make money in 12 of the last 13 quarters, but the loss was not as grave as analysts had predicted.

Stock indices had a negligible and very brief reaction to news reports that said the FBI has issued an advisory to Texas oil refineries that they may be targeted for terrorist attacks. Shares of some large oil companies and refiners with a presence in the region, like Valero Energy, fell slightly.

But shares of Marathon Oil fell 4.7 percent to $30.78 and ConocoPhillips slipped 1.8 percent to $66.04. A factor may have been the price of oil, which fell sharply on Thursday after new data showed a big jump in U.S. crude supplies.

Overseas, Japan’s Nikkei average finished Thursday up 1.5 percent. In Europe, France’s CAC-40 added 1.5 percent, Britain’s FTSE 100 rose 1.5 percent and Germany’s DAX gained 2.3 percent.

Reuters and the AP contributed to this report.

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