Stocks advance after GDP report; Dow rises 190 points

NEW YORK -- Wall Street was feeling more upbeat Thursday after a government report showed the economy contracted in the third quarter by less than expected and after the Federal Reserve's second interest rate cut in a month. The major stock indexes jumped more than 2%, including the Dow Jones industrials, which rose more than 180 points.

The Commerce Department reported that the nation's economic output was the weakest since the third quarter of 2001, but it wasn't as bad a showing as Wall Street had feared. The department said the gross domestic product, the measure of all goods and services produced within the U.S., fell at a 0.3% annual rate in the July-September quarter, rather than 0.5% as expected.

In trading Thursday, the Dow rose 189.73, or 2.11%, 9,180.69. In the broader market, the Standard & Poor's 500 index rose 24.00, or 2.58%, to 954.09, and the Nasdaq composite rose 41.31, or 2.49%, to 1,698.52.

Investors' cautious optimism and generally calm trading followed a mixed finish Wednesday after the Fed's decision to lower its fed funds rate by a half-point to 1%. Many investors had hoped the market would build on an 889-point surge in the Dow Jones industrial average on Tuesday. But some of the buying momentum reappeared Thursday after the GDP report and the Fed's second interest rate cut since Oct. 8.

Michael Strauss, chief economist at Commonfund, said Wall Street was relieved that the GDP figures weren't worse and that, more broadly, investors are drawing some confidence from the government's array of efforts to revive the credit markets as boding well for a weak economy.

"I think it's sort of 'What do you have to do to get someone back from cardiac arrest?' You have to shock them pretty hard and sometimes you have to shock them a couple of times. I think that's what going on here," he said, referring to steps like the Fed's rate cuts and government cash injections in banks, which began this week.

Strauss contends the programs, most of which have yet to take effect, are creating some appetite for snapping up stocks that have been pounded down this month.