* U.S. GDP revised sharply downward, but other data stronger
* S&P sets intra-day high, leading European shares to
* Euro at year's high as inflation stabilizes, cooling ECB
By Herbert Lash
NEW YORK, Feb 28 Stocks on Wall Street zoomed to
a new high on Friday, shrugging off a revised downward estimate
to U.S. growth, while the euro hit its highest level this year
after inflation in Europe stabilized, cooling expectations of
looser monetary policy.
The benchmark Standard & Poor's 500 stock index surged to an
intraday record after a round of mostly positive economic data.
A weaker-than-expected read on U.S. gross domestic product,
however, cast some doubt on the outlook for growth and whether
higher equity valuations are warranted.
American GDP expanded at a 2.4 percent annual rate in the
fourth quarter, down sharply from the 3.2 percent pace estimated
in January and 4.1 percent logged in the third quarter, the
Commerce Department said.
But the pace of business activity in the U.S. Midwest rose
slightly in February, beating expectations and snapping a
three-month run of slower growth, the business barometer from
the Institute for Supply Management-Chicago showed.
Also, contracts to buy previously owned U.S. homes edged up
in January after a weather-related hit at the end of 2013, and
U.S. consumer sentiment rose marginally in February even as
concerns about extreme weather persisted, a survey showed.
"The million-dollar question is how much of the slowdown is
because of the weather, and how much is because of the economy
getting weaker?" said Bill Stone, chief investment strategist at
PNC Wealth Management in Philadelphia, with $125 billion in
assets under management.
"The market continues to believe that weather is behind most
of it, and we generally agree with that, but we will need to see
a pick-up" in growth, he added.
MSCI's all-country world equity index
rose 0.62 percent, while stocks in Europe rebounded on the
relatively stronger U.S. data.
The Dow Jones industrial average rose 122.08 points,
or 0.75 percent, at 16,394.73. The Standard & Poor's 500 Index
was up 13.36 points, or 0.72 percent, at 1,867.65. The
Earnings have beaten expectations, helping lift the U.S.
"If you look at how numbers came in for the fourth quarter,
they were really pretty good; the problem was guidance and
outlook was not so great," said Daniel Morris, global investment
strategist at TIAA-CREF.
Optimism at the beginning of the year that the economy would
accelerate has been tempered by corporate caution, he said.
Danish shipper A.P. Moller-Maersk, seen as a
bellwether for the global economy as its vessels account for 15
percent of global container shipping, gave a cautious outlook
when it reported results on Thursday, Morris said.
"Companies aren't jumping up and down saying 'Hey, we're
really optimistic.' That's what has weighed on the market."
European shares initially dipped as euro zone inflation data
came in at 0.8 percent, one-tenth of a percentage point above
expectations, lessening the prospect of new monetary stimulus
measures from the European Central Bank.
The pan-European FTSEurofirst 300 index
subsequently closed up 0.22 percent at 1,348.39.
The euro gained as traders had expected a slower pace of
inflation in the euro zone and subsequent lower interest rates.
Major currency markets have been broadly stable as investors
retreat from emerging markets to safer bets like the euro,
dollar, yen and Swiss franc.
"The euro certainly looks good, everything is in place for
more gains. But I wouldn't race out and buy it at the moment,"
said Graham Davidson, FX trader with NAB in London.
The euro rose 0.74 percent to 1.3810, its first time
above $1.38 this year. The dollar slipped against the Japanese
yen, falling 0.04 percent 102.07.
Oil had dropped below $109 a barrel as the revised U.S. GDP
estimates curbed the demand outlook. The severe U.S. winter had
supported oil prices earlier this year, but concerns about
demand from the United States and China, the world's No. 1 and
No. 2 oil consumers, have recently weighed on prices.
But crude prices rebounded on the stronger U.S. data.
Brent crude rose 25 cents to $109.21 a barrel. U.S.
oil rose 41 cents to $102.81.
U.S. Treasury debt prices fell, reversing Thursday's gains,
as stronger-than-expected economic data led to profit-taking and
set the market on track for its biggest weekly loss in a month.
The 10-year U.S. Treasury note fell 10/32 in
pricing, pushing its yield up to 2.6762 percent.