U.S. Stock Markets Rally

Stocks rallied today, after losing some ground earlier this week, with the announcement of better-than-expected reports on the nation's gross domestic product and an increase in initial weekly unemployment claims.

The Dow Jones industrial average, an index of 30 blue-chip stocks, opened lower after yesterday's losses but eventually climbed 2.1 percent, or 173 points.

The broader Standard & Poor's 500-stock index closed up 2.1 percent, or 19 points, and the tech-heavy Nasdaq also rose 2.1 percent, or 37 points. Both lost ground late yesterday after the Federal Reserve kept interest rates unchanged.

Peter Cardillo, chief market economist with New York-based Avalon Partners, said he thinks today's gains are "not so much a reaction to the economic news of today, but perhaps a delayed reaction to the Fed statement."

Any quick rate hikes could halt the fragile recovery process, he said, and the Fed's choice not to expand their buying programs of Treasury bonds "might help alleviate some of the talk of inflation heating up."

The government released revised figures on the first-quarter gross domestic product indicating that the economy shrank at a slower rate than previously reported. GDP decreased at an annual rate of 5.5 percent in the first quarter of 2009, according to today's government numbers, a revision from the 5.7 percent previously announced.

Jobless claims were up 15,000 to a total of 627,000, after jumping 4,000 last week. That jump brings claims to their highest level in five weeks, said Ian Shepherdson, chief U.S. economist for High Frequency Economics, in a research note this morning.

"We still firmly believe that the underlying trend in claims is downwards," said Shepherdson. "But it is slow and uneven."

Also today, Ben S. Bernanke, chairman of the Federal Reserve, testified before the House Oversight and Government Reform Committee, facing questioning about Bank of America's purchase of investment bank Merrill Lynch last year. He and former Treasury secretary Henry M. Paulson Jr. are accused of keeping federal regulators in the dark while pushing the deal through.

Bernanke adamantly denied threatening to fire Bank of America chief executive Ken Lewis if Lewis pulled out of the deal. But legislators seemed reluctant to accept this contradiction to Lewis's previous testimony.

"If you're questioning someone's judgment and you're in a supervisory role with the authority to let them go, how is that not a threat?" Rep. Jason Chaffetz (R-Utah) asked.

Crude oil climbed more than 2 percent to $70.23 a barrel on the New York Mercantile Exchange.

Overseas markets were mixed. London's FTSE was down 0.6 percent, and the Dax in Germany lost 0.7 percent. Japan's Nikkei gained 2.2 percent.