(RTTNews) - With oil prices showing a significant drop, stocks are seeing additional buying interest in early afternoon trading on Thursday. The markets started the day on a high note following a much better than expected reading on economic growth.

U.S. economic growth in the second quarter far exceeded the previous estimate, according to a report released by the Department of Commerce on Thursday, with the better than expected growth 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.

In a note to clients, Joel Naroff, Chief Economist at Naroff Economic Advisors, noted that the data showed that “the economy actually expanded quite solidly in the spring.” Looking ahead, Naroff stated, “We could post a little slower, but not disastrous rate during the second half.”

Stocks saw additional buying interest as oil prices turned lower after earlier topping $120 a barrel, as traders show they feel a recent rally may have been overdone. Oil hit as high as $120.50 a barrel amid concerns Tropical Storm Gustav could cause problems in the Gulf of Mexico’s oil region. The price of oil is currently down $3.19 at $114.96 a barrel.

In other news, Bond insurer MBIA Inc. (MBI) said late Wednesday that its insurance subsidiary MBIA Insurance Corp. will reinsure $184 billion of investment grade U.S. public finance bonds insured by its competitor Financial Guaranty Insurance Co., or FGIC.

The deal resulted from a competitive process undertaken at the direction of the New York State Insurance Department and is seen as possibly enabling FGIC to avoid bankruptcy. As per the deal, MBIA will receive unearned upfront premiums, net of a ceding commission paid to FGIC, of about $741 million in connection with the reinsurance. MBIA is currently soaring 22.4 percent.

In recent trading, the major averages have continued to see considerable strength. The Dow is currently up 192.81 at 11,695.32, the Nasdaq is up 24.17 at 2,406.63 and the S&P 500 is up 14.70 at 1,296.36.

Sector News

Airline stocks are turning in some of the best performances, boosted by the sharp drop in oil prices. The Amex Airline Index is currently up 8.5 percent, reversing nearly three day’s worth of declines. With the gain, the index is climbing off of the three-week closing low set on Wednesday.

Within the airline sector, UAL Corp. (UAUA) announced plans on Wednesday to cut 1,550 flight attendant jobs as it reduces flying in the fall. The job cuts equal about 10 percent of its cabin work force. Shares of the airline are up 11.3 percent.

Bank stocks are also showing considerable strength, with the S&P Bank Index climbing 4.2 percent. Fannie Mae (FNM), Freddie Mac (FRE) and MGIC Investment (MTG) are among the biggest gainers. On Wednesday, Fannie Mae announced a shake up in its management team, replacing three top executives.

Fannie Mae is currently up 11 percent, Freddie Mac is up 10 percent and MGIC Investment is up 13.7 percent.

Adding to gains posted in the previous session, housing stocks are sharply higher as well. The Philadelphia Housing Index is up 3.9 percent a day after Mortgage Bankers Association released its weekly application survey, showing a slight increase in mortgage applications.

Other stocks that are posting notable gains include brokerage, real estate and defense stocks. The Amex Securities Broker/Dealer Index is up 2.9 percent, the Morgan Stanley REIT Index is up 2.2 percent and the Philadelphia Defense Index is up 1.9 percent.

On the other hand, oil and oil service stocks are sharply lower following the drop in oil prices. The Amex Oil Index is down 1.3 percent, while the Philadelphia Oil Service Index is falling 1.9 percent. Gold and steel stocks are seeing modest declines as well.

Stocks In The News

Among individual stocks, Tiffany & Co. (TIF) is seeing significant buying interest after the company reported higher second quarter earnings, driven by strong sales growth in the Asia-Pacific and European regions combined with higher operating margins. The company also lifted its full-year earnings outlook.

Shares of the fine jewelry retailer are currently trading higher by 9.8 percent, extending gains posted in the previous two sessions. Earlier in the day, the stock set a two-month intraday high.

Oracle (ORCL) is also posting a substantial gain. The software company announced late Wednesday that it has appointed Jeff Epstein as executive vice president and chief financial officer, effective in September. The stock is climbing 1.5 percent, bouncing further off of a three-week closing low let on Tuesday.

On the other hand, Williams-Sonoma (WSM) is showing considerable weakness in early afternoon trading. While the home products retailer saw better than expected second quarter results, it lowered its net revenue guidance for the third quarter. The stock is currently down 9 percent after setting a six-year intraday low.

Other Markets

Stock markets across the Asia-Pacific region closed mixed on Thursday after seeing seesaw trading despite Wall Street finishing firm overnight. Japan’s benchmark Nikkei 225 index closed up 0.1 percent.

Meanwhile, the major European markets ended the session higher, reversing some of the losses posted in the past two sessions. The French CAC 40 Index closed up 2 percent compared to a 1.6 percent gain by the German DAX Index. The U.K.’s FTSE 100 Index advanced 1.3 percent.

In the bond market, treasuries continue to show weakness in early afternoon trading, as investors move out of bonds and into the stock markets. Subsequently, the yield on the ten-year note is currently up 4.2 basis points at 3.814 percent.

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

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