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US STOCKS-Wall St climbs on GDP data; heavy volume expected

Chuck Mikolajczak
Friday, 20 Dec 2013 | 11:58 AM ET

* Red Hat gains after earnings, outlook

* Blackberry up after premarket tumble following results

* Final GDP reading tops expectations

* Indexes up: Dow 0.46 pct, S&P 0.54 pct, Nasdaq 0.92 pct

NEW YORK, Dec 20 (Reuters) - U.S. stocks rose on Friday, putting the S&P 500 on pace for its best week in five months, as an unexpectedly strong report on U.S. growth boosted investor confidence that the economy could handle a wind-down of Federal Reserve stimulus.

Gross domestic product grew at a 4.1 percent annual rate in the third quarter, the fastest pace in almost two years, and higher than the 3.6 percent pace reported earlier this month. Business spending was also stronger than previously estimated.

"It's very surprising, it's a disconnect, it doesn't make sense, yet that is what the number is and you see what the market is doing, you get a little bit of euphoria," said Ken Polcari, director of the NYSE floor division at O'Neil Securities in New York.

Volume is expected to be active, as investors deal with the last "quadruple witching" day of the year, with the quarterly expiration and settlement of December contracts for stock options, stock index options, stock index futures and single stock futures.

In addition, most U.S. index funds will adjust their portfolios as a result of quarterly rebalancing by index providers. Credit Suisse expects the rebalancing to result in over $30 billion in total trading at today's close.

"You will get activity and you will get large volume - today will be a huge-volume day but it doesn't necessarily indicate anything other than the rebalance," Polcari said.

On Wednesday, the central bank modestly trimmed the pace of its market-friendly monthly asset purchases, by $10 billion to $75 billion, and suggested its key interest rate would stay at rock-bottom longer than previously promised.

Thanks largely to the Fed's economy-buoying stimulus, the benchmark S&P 500 has soared more than 27 percent this year, and is on track for its best year since 1997.

Fed Chairman Ben Bernanke said if U.S. job gains continue as expected, the bond purchases will be cut at a "measured" pace through much of next year, probably being wound down "late in the year, certainly not by the middle of the year."

The Dow Jones industrial average rose 74.75 points, or 0.46 percent, to 16,253.83, the S&P 500 gained 9.81 points, or 0.54 percent, to 1,819.41 and the Nasdaq Composite added 37.315 points, or 0.92 percent, to 4,095.449.

Red Hat Inc jumped 19.1 percent to $58.34 as the best performer on the S&P 500 after the world's largest commercial distributor of the Linux operating system reported third-quarter results above analysts' estimates and raised its full-year forecast.

Blackberry Ltd reported a massive quarterly loss on Friday due to an inventory writedown and asset impairment charges. Still, U.S.-listed shares jumped 14.9 percent to $7.17 after falling more than 7 percent in premarket trading.

Walgreen Co advanced 1.8 percent to $57.99 after the largest U.S. drugstore operator reported higher first-quarter sales.

Oracle Corp edged up 0.4 percent to $36.74 after it said it would buy Responsys Inc in a deal valued at $1.5 billion as the world's No. 2 software maker beefs up its cloud offerings. Responsys shares surged 38.6 percent to $27.05.

Jones Group Inc climbed 4.9 percent to $14.82 after the company said Thursday it had agreed to be bought by Sycamore Partners for $15 per share, or $1.2 billion.

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RHT
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