staff and news service reports
updated 10/31/2005 8:24:43 AM ET 2005-10-31T13:24:43

Stocks surged Friday, with the Dow Jones industrial average chalking up its best one-day gain in over six months, as investors celebrated data showing better-than-anticipated economic growth last quarter despite the destruction wrought by hurricanes Katrina and Rita.

Major Market Indices

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 finished Friday up 172.82 points, or 1.7 percent, recovering all of Thursday’s 115-point drop and posting its biggest one-day gain since April 21. It was the Dow’s second triple-digit rally this week after Monday’s 170-point surge.

Other market indexes surged. The broader Standard & Poor’s 500-stock index finished Friday up 19.51 points, or 1.7 percent, while the tech-rich Nasdaq composite index jumped 26.07 points, or 1.3 percent.

All three market indexes finished the week higher, with the Dow industrials rising 1.8 percent, the Nasdaq gaining 0.4 percent and the S&P 500 index advancing 1.6 percent.

The market’s rally accelerated late in the day, with investors shaking off news mid-session that Vice President Dick Cheney’s chief of staff, Lewis Libby, has been indicted on five charges that include obstruction of justice, making false statements and perjury in the investigation into the leak of a covert CIA agent’s name.

Friday’s rally closed out a week of volatile trading, as investors juggled mixed corporate earnings reports and renewed interest-rate worries following Monday’s 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 now retreating from record levels, many fear the Fed may go overboard and send the economy sliding.

Oil prices wavered Friday despite fears that recovering Gulf Coast facilities will struggle to meet heating oil demand as winter nears.

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 look to boost returns before year-end. “I don’t think [investors] are getting that much from the individual earnings reports, causing them to switch gears” in their long-term positions, he said.

Chevron’s earnings grew 12 percent last quarter, but the company estimated it lost at least $600 million from the hurricanes and other storms. The company also warned the fallout will have an even larger impact on fourth-quarter results. Chevron nonetheless rose 88 cents to $57.38.

Microsoft Corp. said late Thursday that its quarterly profit climbed 24 percent on stronger demand for software that runs PCs and corporate servers, but video-game sales declined and the company issued a slightly weaker full-year earnings forecast. Still, Microsoft added 68 cents to $25.53.

(MSNBC is a Microsoft-NBC joint venture.)

Drugmaker Bristol-Myers Squibb Co. reported 27 percent profit growth last quarter, largely from selling its U.S. and Canadian nonprescription medicines business. But shares fell 53 cents to $21.14 after the company said its adjusted earnings missed Wall Street targets and lowered its full-year outlook.

As part of its reorganization, bankrupt Delta Air Lines Inc. announced plans to close down its discount carrier Song , created to compete with low-cost rivals like JetBlue Airways Corp. and AirTran Airways. The news lifted JetBlue 76 cents to $18.05, and AirTran Holdings Inc. added 19 cents to $14.40.

Overseas, Japan’s Nikkei stock average sank 0.53 percent. In Europe, Britain’s FTSE 100 gained 0.59 percent, Germany’s DAX index climbed 0.41 percent, and France’s CAC-40 was lower by 0.22 percent.

Reuters and the Associated Press contributed to this report.


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