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Stocks rise on strong US economic growth

Source: Agencies | December 21, 2013, Saturday | Online Edition

An unexpectedly strong report on US economic growth pushed stocks higher yesterday, capping off Wall Street's best week in three months.

The report, which showed the US economy grew at a healthy 4.1 percent annual pace between July and September, is the latest positive piece of economic data investors have gotten in recent weeks.

"It's a fantastic signal that we're getting robust growth and it looks like it might be accelerating," said Jack Ablin, chief investment officer for BMO Private Bank in Chicago, which oversees US$66 billion.

Yesterday, the Dow Jones Industrial average rose 42.06 points, or 0.3 percent, to 16,221.14. The index ended the week up 3 percent, its biggest gain since the week of September 13.

The Standard & Poor's 500 index rose 8.71 points, or 0.5 percent, to 1,818.31 and the Nasdaq composite added 46.61 points, or 1.2 percent, to 4,104.74. Both indexes ended the week up roughly 2.5 percent.

In a sign that investors have a strong appetite for risk, the Russell 2000 index, an index made up mostly of smaller, high-growth companies, closed up nearly 2 percent Friday to 1,146.47.

The bulk of this week's gains came Wednesday, after the Federal Reserve announced it was going to pull back on its economic stimulus program. The Fed said it would reduce its bond-buying program to US$75 billion a month from US$85 billion a month.

Investors cheered the surprise decision, sending the Dow up nearly 300 points Wednesday.

"They had to get out of the way," said Quincy Krosby, market strategist with Prudential Financial. "The more the market obsessed about when the Fed was going to pull back, the more the market couldn't focus on anything else, like the improving economy."

Yesterday's gross domestic product estimate was the latest report to show unexpected strength in the US economy. The 4.1 percent annualized growth rate is the fastest since 2011. More importantly, most of the increase came from consumer spending, a key part of the US economy.

In other markets, the yield on the benchmark US 10-year Treasury note fell to 2.89 percent, from 2.93 percent the day before. Gold rose US$10.10, or 0.8 percent, to US$1,203.70 an ounce.

In company news:

— Blackberry jumped 97 cents, or 16 percent, to US$7.22. The struggling smartphone maker posted a US$4.4 billion loss but also said it would outsource its hardware business to focus on software and services.

— Red Hat, an open-source software developer, jumped US$7.10, or 15 percent, to US$56.10, one of the biggest increases in the S&P 500 index. Red Hat's adjusted earnings came in well ahead of Wall Street's estimates.

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