Wall Street jumps as GDP growth spurs optimism

By Ellis Mnyandu

NEW YORK (Reuters) - U.S. stocks logged their best one-day percentage gain in three months on Thursday as investors saw data showing the U.S. economy returned to growth in the third quarter as brightening the outlook for profits.

The government's first estimate of U.S. gross domestic product showed the economy expanded at an annual rate of 3.5 percent in the third quarter, suggesting it was emerging from the worst recession in 70 years. The quarter of growth was the first after more than a year of contraction in GDP. For details, see [ID:nN29354547]

Equity gains were widespread, with big manufacturers, technology, financials, energy and the materials sectors all benefiting. The S&P 500 and the Nasdaq halted a four-day rout.

Sentiment was also boosted by stronger-than-expected quarterly results from consumer product heavyweights Procter & Gamble Co (PG.N) and Colgate-Palmolive Co (CL.N).

The GDP report served as more affirmation of investors' recent bets on the recovery, which fueled a sharp advance from the 12-year lows of early March.

"We see today that the optimism about corporate earnings reports is just being confirmed in the GDP report," said Kenneth Kamen, president of Mercadien Asset Management in Hamilton, New Jersey. "We are starting to see the economy really recover and GDP picking up."

The Dow Jones industrial average .DJI gained 199.89 points, or 2.05 percent, to end at 9,962.58. The Standard & Poor's 500 Index .SPX jumped 23.48 points, or 2.25 percent, to 1,066.11 -- marking its biggest one-day percentage gain in three months. The Nasdaq Composite Index .IXIC shot up 37.94 points, or 1.84 percent, to close at 2,097.55.

FEAR FACTOR FADES

Weakness in the U.S. dollar also underpinned Thursday's stock action as the appetite for riskier assets resurfaced.

The CBOE Volatility Index .VIX, Wall Street's most closely watched gauge of investor fear, slid 11.3 percent, its biggest one-day percentage drop in eight months.

Economists in a Reuters poll last week expected GDP to gain 3.3 percent, although some recent data led many to trim forecasts this week.

Shares of Dow component P&G, which also raised its full-year revenue outlook, gained 4 percent to $59.54, while Colgate-Palmolive shares rose 1.6 percent to $78.94. The S&P consumer staples index .GSPS gained 1.8 percent.

Caterpillar Inc (CAT.N), whose products include bulldozers and excavators, rose 5.2 percent to $57.25, as shares of aircraft maker Boeing Co (BA.N) rose 3.4 percent to $48.81.

iPhone maker Apple Inc (AAPL.O) rose 2.1 percent to $196.35 on Nasdaq, where Symantec Corp (SYMC.O) jumped 12.8 percent to $17.74, a day after the business software maker posted a quarterly profit that eclipsed Wall Street's forecasts.

Several brokerages raised price targets on Symantec.