(RTTNews) - Stocks remain sharply higher in mid-afternoon trading on Thursday following the release of a government report that showed that the economy grew faster than expected. A notable drop in oil prices is also contributing to the standout performance.

The Department of Commerce set a positive tone before the markets opened when it released its preliminary report on second quarter GDP. The report showed that U.S. economic growth in the quarter far exceeded the previous estimate primarily due to an upward revision to exports.

The report showed that gross domestic product increased at an annual rate of 3.3 percent in the second quarter compared to the advance estimate of 1.9 percent growth. Economists had been expecting GDP growth for the quarter to be revised up to 2.7 percent.

Separately, the Labor Department released its report on initial jobless claims in the week ended August 23rd on Thursday, showing that jobless claims fell in line with economist estimates compared to an upwardly revised reading for the previous week.

Falling oil prices are also contributing to the upward move despite concerns Tropical Storm Gustav could cause problems in the Gulf of Mexico’s oil region. Some analysts think that that the recent run-up in prices is overdone. The price of oil is currently down $2.05 at $116.10 a barrel.

In recent trading, continue to show notable strength, setting fresh intraday highs. The Dow is currently up 200.13 at 11,702.64, the Nasdaq up 28.86 at 2,411.32 and the S&P 500 is up 16.74 at 1,298.40

Dow Components

The majority of the Dow components are seeing notable gains, sending the blue chip index sharply higher. Of the 30 stocks that make up the Dow, only one is showing any weakness.

AIG (AIG) is turning in one of the Dow’s best performances, benefiting from strength seen in the insurance sector. Shares of the insurer are currently up 4.8 percent, climbing further off of its 13-year closing low set on Monday.

Other financial stocks are higher as well, including Citigroup (C), JP Morgan Chase (JPM) and Bank of America (BAC). Citigroup is up 4 percent, JP Morgan Chase is up 3.3 percent and Bank of America is up 3.7 percent.

According to the state of Massachusetts, Bank of America has agreed to redeem $43 million worth of auction rate securities held by the Massachusetts Turnpike Authority and the Massachusetts Housing Partnership.

American Express (AXP) is also showing considerable strength. Shares of the credit card issuer are trading higher by 3 percent, on track to set a monthly closing high.

Other Dow components that are seeing notable gains include Boeing (BA), Caterpillar (CAT) and AT&T (T). Boeing is up 3.1 percent, compared to a 2.9 percent gain by Caterpillar. AT&T is trading higher by 2.8 percent.

On the other hand, Coca Cola (KO) is showing considerable weakness after a Credit Suisse analyst downgraded the stock to a Neutral rating due to an increasingly difficult U.S. market. The analyst also lowered Coca Cola’s price target to $57 from $60. Shares of the beverage maker are currently down 1.5 percent, on track to set a monthly closing low.

Sector News

Airline stocks are posting some of the biggest gains, boosted by the $2 a barrel decline in oil prices. The Amex Airline Index is up 8.9 percent, ending its three-day selling spree.

Within the sector, UAL Corp. (UAUA) is up 10.4 percent, bouncing off of the three-week closing low set in the previous session. On Wednesday, the airline announced plans to cut a substantial number of flight attendant positions as it reduces flights.

Housing stocks are also seeing significant buying interest, with the Philadelphia Housing Index climbing 4.3 percent. The index is adding to a strong gain posted in the previous session after the Mortgage Bankers Association released its weekly application survey, showing a slight increase in mortgage applications.

Among housing stocks, Radian Group (RDN) is among the best performers. Shares of the mortgage insurer are currently up 14 percent. On Wednesday, Standard & Poor’s cut the counterparty credit rating on Radian Group to BB+, which is considered junk status. Standard & Poor’s cut the ratings on Radian’s mortgage insurance subsidiaries as well, although they are still considered investment grade.

The financial sector is sharply higher as well, boosted by strength seen in Fannie Mae (FNM) and Freddie Mac (FRE). Fannie Mae is currently trading higher by 13.4 percent, while Freddie Mac is up 10.5 percent. The S&P Bank Index is up 3.8 percent and the Amex Broker/Dealer Index is up 3.1 percent.

Retail stocks are also showing strength. The S&P Retail Index is up 2 percent, adding to modest gains posted in the previous two sessions. Dillard’s (DDS) is one of the biggest gainers in the retail sector. The stock is up 10.5 percent a day after the company reported second quarter results that missed analysts’ expectations.

Other stocks that are seeing notable gains include defense, networking and real estate stocks. The Philadelphia Defense Index is up 2.2 percent, the Amex Networking Index is up 2.2 percent and the Morgan Stanley REIT Index is up 2.3 percent.

On the other hand, oil and oil service stocks are seeing considerable selling pressure, hurt by the drop in oil prices. The Amex Oil Index is down 0.6 percent, while the Philadelphia Oil Service Index is down 1.2 percent.

Other Markets

Stock markets across the Asia-Pacific region closed mixed on Thursday after seeing seesaw trading despite Wall Street finishing firm overnight. Meanwhile, the major European markets ended the session higher, reversing some of the losses posted in the past two sessions.

In the bond market, treasuries have pared their losses in recent trading, with the benchmark ten-year note moving into positive territory in the past few minutes. Subsequently, the yield on the ten-year note is currently down less than a basis point at 3.77 percent.

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Posted in Categories: Economy, Eurozone, Releases, UK, USA.

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