By CHRISTINA REXRODE, Associated Press
NEW YORK (AP) — U.S. stock indexes moved higher in early trading Wednesday, despite news that the U.S. economy has been growing more slowly than first estimated.
In early trading, the Dow Jones industrial average was up 116 points, or 0.8 percent, to 14,879. The Standard & Poor's 500 was up 14, or 0.9 percent, to 1,602.
The gains were broad. All 10 industry sectors in the S&P 500 were up, led by health care and bank stocks.
The government reported Wednesday that the U.S. economy grew at an annual rate of 1.8 percent in the first three months of the year, significantly lower than the previous estimate of 2.4 percent. The Commerce Department said that consumers spent less than previously estimated, a troubling development in a country where consumer spending makes up more than 70 percent of the economy.
Investors, however, might have been pushing the market higher because they decided that they pushed it too low last week, a sentiment that investors credited for Tuesday's stock gains. Or they may have decided that the slower-growing economy will influence the Federal Reserve to delay any plans to pull back on stimulus measures. Those measures, which include buying bonds to push investors into stocks, and keeping interest rates low to spur borrowing, are meant to prop up the economy.
Fed Chairman Ben Bernanke set off a stock market plunge a week ago when he said the Fed could rein in the bond-buying program starting as early as this year. It wasn't that investors were surprised that the Fed will pull back on its stimulus programs: Most everyone expects that to happen eventually. It was more that they were worried that the Fed might pull out too soon, before the stock market could stand on its own without the Fed propping it up.
Other Fed officials have also scrambled to reassure investors that the central bank won't pull out of stimulus measures until it's sure the economy can handle it. Dallas Fed president Richard Fisher and Richmond Fed president Jeff Lacker are both scheduled to testify at a hearing with the U.S. House's banking committee Wednesday morning. While the Fed isn't the topic — how to prevent bank bailouts is — either could take the opportunity to speak on where they think Fed policy should go.
U.S government bonds rallied early Wednesday, sending yields lower. The yield on the 10-year Treasury note, a benchmark for many kinds of loans, fell to 2.53 percent from 2.61 percent late Tuesday. The yield has risen sharply over the last week as traders sold bonds in anticipation of the Fed winding down its bond-buying program. It was 2.19 percent June 18, the day before the Fed outlined its plans.
The price of gold fell sharply. Gold for August delivery fell $36, or 2.8 percent, to $1,239 an ounce. Crude oil slipped 27 cents, or 0.2 percent, to $95.08 a barrel.
At 1.8 percent, the country's economic growth for 2013 would be less than 2010 or 2012, and in line with 2011. And while investors are glad for growth — after all, the U.S. economy shrank in 2008 and 2009 — most say they'd like to see an annual rate of 3 or 4 percent before they can feel comfortable about the pace of the economic recovery.
In other stock trading, the Nasdaq composite index was up 29 points, or 0.9 percent, to 3,377.
Among companies making big moves:
—Fertilizer maker Mosaic fell after Citigroup analysts downgraded the stock to "Neutral" from "Buy," citing a hold-up in the company's stock buybacks and questions over demand for fertilizer. The stock fell $1.91, or 3.4 percent, to $54.
—Gun manufacturer Smith & Wesson fell, even after reporting that its profits doubled, as quarterly revenue missed analysts' forecasts. The stock fell 23 cents, or 2.3 percent, to $9.76.
—General Mills, whose products include Cheerios and Nature Valley granola bars, fell after reporting earnings predictions that came in slightly below analysts' estimates. The stock fell 49 cents, or 1 percent, to $47.84.
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