NEW YORK — Evidence of a moderating economy boosted stocks Friday after a sharp slowdown in second-quarter gross domestic product growth fed hopes for an end to rising interest rates.
Investors cheered after the Commerce Department said GDP growth slowed to a 2.5 percent annual rate from 5.6 percent in the first quarter. Although the reading drove concerns that the economy could be headed for a downturn — economists were predicting a 3 percent rate — it reinforced beliefs that the Federal Reserve may not need to hike interest rates further.
Wall Street's optimism overshadowed data showing soaring inflation and weakening consumer confidence. The GDP report said core consumer prices — excluding energy and food — surged 2.9 percent last quarter, while the department's employment cost index rose a stronger-than-forecast 0.9 percent.
Oil prices fell as energy traders took profits from recent gains on worries about political tension in the Middle East and Nigeria. A barrel of light crude lost 62 cents to $73.92 on the New York Mercantile Exchange.
In midmorning trading, the Dow Jones industrial average gained 59.07, or 0.53 percent, to 11,159.50. The Dow had closed little changed since soaring 230 points on Monday and Tuesday.
Broader stock indicators also advanced. The Standard & Poor's 500 index was up 6.27, or 0.5 percent, at 1,269.47, and the Nasdaq composite index climbed 13.85, or 0.67 percent, to 2,068.32.
Advancing issues outpaced decliners by more than 4 to 1 on the New York Stock Exchange, where volume of 194.2 million shares trailed the 215.8 million shares changing hands at the same point Thursday.
The economic data lifted bonds, with the yield on the 10-year Treasury note sliding to 4.98 percent from 5.04 percent late Thursday. The U.S. dollar extended its losses to the Japanese yen; gold prices slipped below $645 an ounce.
In economic news, the University of Michigan's consumer sentiment index for July lost 0.2 points to 84.7. However, the report also showed Americans were increasingly upbeat about the economic outlook despite high gasoline prices and lending costs.
Chevron Corp. posted its best-ever quarterly profit, which rose 18 percent but fell far short of Wall Street estimates. Its earnings capped a round of stellar results from oil companies, but Chevron lost $1.90 to $65.83.
Oil services company Baker Hughes Inc. also saw its earnings skyrocket from the sale of its stake in WesternGeco. Baker Hughes nonetheless fell $2.79 to $78.06.
Overseas, Japan's Nikkei stock average added 1.07 percent. In afternoon trading, Britain's FTSE 100 edged up 0.02 percent, Germany's DAX index lost 0.35 percent and France's CAC-40 was lower by 0.54 percent.
The Russell 2000 index of smaller companies rose 4.75, or 0.69 percent, to 690.44.
———
On the Net:
New York Stock Exchange: www.nyse.com
Nasdaq Stock Market: www.nasdaq.com