By Anora Mahmudova, MarketWatch
NEW YORK (MarketWatch) -- U.S. stocks rallied Friday with the Dow Jones Industrial Average on track for its best weekly gain since January as the government reports showed the economy grew faster than expected in the third quarter.
Investors greeted the upward revision to the gross domestic production index as a welcome backdrop for future earnings growth.
The U.S. economy expanded at an annual rate of 4.1% in the third quarter, its fastest pace in two years owing to stronger consumer spending and business investment than previously reported, according to newly revised government figures.
The Dow Jones Industrial Average (DJI) aimed for the third record close in a row. The Dow rose 86 points or 0.5% up to 16,265.24 and is poised for a 3.2% weekly gain.The S&P 500 index (SPX) rose, hitting a fresh intraday high. On pace for a record close the benchmark rose 11 points or 0.6% to 1,820.72 and was set to record a 2.6% weekly gain after two straight weeks of losses. The Nasdaq Composite (RIXF) rallied 41 points, or 1%, to 4,099.65.
S&P 500 Homebuilders gained the most over the past week, rising 6.4%. Industrials and materials sectors both added more than 3% in the past five days.
"Now that all the distractions are behind us -- the Affordable Care Act and its botched implementation, the budget debate, debt ceiling, and this week the Fed -- it seems like the markets can finally focus on fundamentals," said Drew Wilson, investment analyst at Fenimore Asset Management.
"Today's upward revision to GDP along with earlier economic data shows that the economy is recovering and it is a big positive for markets. As multiples are thinly stretched, earnings power will now come from stronger growth," he added.
Thursday saw a mixed trading session, with the Dow average closing at its 46th record of the year, while the two other benchmarks inched lower. Earlier in the week, the U.S. indexes soared as investors interpreted the Federal Reserve's decision to begin tapering bond purchases in January as confidence in the underlying strength of the economy.
* The buzz: Shawn Langlois writes that the end-of-week hiccup arrives in the form of quadruple witching, the last trading day for various options and futures. "So, we might see a pickup in volume and volatility for what would otherwise be a sleepy time of year. We'll also get the added bonus of S&P 500 rebalancing, which includes Facebook officially joining the index."
* The comment: "If there are any doubts that the Fed made the right decision on Wednesday to begin tapering, let them be laid to rest. The final reading for third quarter U.S. GDP came in much better than expected at 4.1% growth, revised up from 3.6%," Douglas Cot��, chief market strategist at ING U.S. Investment Management, wrote in a note. "While the Fed was correct to hand the baton over to the market, it will not be without consequence. The Fed has been managing market volatility, so anticipate an increase to more normal levels. However, the economy is strong enough to stand on its own two feet, and we are winding down 2013 in better shape than when we began," he added.
In corporate news, several companies reported quarterly results before the markets open.
* BlackBerry shares initially dropped after the company reported a bigger a third-quarter loss than expected. However, shares rallied 12.3% as the firm also announced it had entered into a five-year strategic partnership with Foxconn to make phones for Indonesia and other fast-growing markets.
* Walgreen Co. shares fell initially but rebounded and are up 2%, after the drugstore chain's fiscal first-quarter profit met estimates. Earnings rose to $695 million, or 72 cents a share, from $413 million, or 43 cents a share, a year earlier. Chief Executive Greg Wasson said margins were affected by generics.
* Shares of CarMax Inc. fell 8.4% after the used-car seller's third-quarter profit missed Wall Street's expectations. Profits rose to $106.5 million, or 47 cents a share, from $94.7 million, or 41 cents a share, in the year-ago period. Revenue rose to $2.9 billion from $2.6 billion.
* Red Hat Inc. surged 19.1% after the software firm on late Thursday said fiscal third-quarter profit rose 50%.
* Shares of Carnival Corp. gained 1.5%, adding to gains from Thursday when the cruise-line operator reported fourth-quarter earnings.
In other financial markets
* Chinese stocks closed at 17-week low, while the rest of Asia was mixed and European stock markets scored the best week since April.
* Gold rebounded from the previous session's losses and reclaimed $1,200-an-ounce level, while most metals prices rose. Oil futures slipped and the dollar fell against most rivals.
More must-reads from MarketWatch:
Witchy volatility, BlackBerry reports and Facebook gets S&P 500'd
U.S. third-quarter growth raised to 4.1%
Lessons from 2013: Stick with your long-term ideas
-Anora Mahmudova; 415-439-6400; AskNewswires@dowjones.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
12-20-13 1353ETCopyright (c) 2013 Dow Jones & Company, Inc.
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