American International Group Inc., Caterpillar Inc. and AT&T Inc. climbed 3 percent each and helped lead gains in nine of ten industry groups in the Standard & Poor's 500 Index after the Commerce Department said gross domestic product grew at a 3.3 percent annual rate. Tiffany & Co., the world's second-largest luxury jewelry retailer, jumped the most in three years on profit that topped analysts' estimates. Energy shares erased an earlier advance, and consumer companies rallied, as oil prices slipped following three days of gains.
The S&P 500 gained 12.16 points, or 1 percent, to 1,293.82 at 2:09 p.m. in New York. The Dow Jones Industrial Average increased 163.09, or 1.4 percent, to 11,665.6. The Nasdaq Composite Index added 18.75 to 2,401.21. More than three stocks rose for each that fell on the New York Stock Exchange.
The S&P 500 extended its August gain to 2.2 percent as the GDP report showed businesses are weathering rising inflation and more than $500 billion in subprime-related bank losses. The government's initial estimate of economic growth was 1.9 percent last month and economists in a Bloomberg survey on average projected 2.7 percent. The data follows an unexpected advance in durable goods orders that helped boost stocks yesterday.
The Dow average's 2.7 percent gain in August makes it the third-best-performing stock measure in the world this month, in dollar terms, and the S&P 500's advance is No. 4., according to data compiled by Bloomberg.
The S&P 500's August gain has been led by so-called consumer discretionary companies, which include retailers and hotel and restaurant chains. The S&P 500 Consumer Discretionary Index rallied 5.7 percent this month through for the best gain among 10 industries as of the close of trading yesterday and climbed another 1.9 percent today.
The group was helped by an 18 percent retreat in oil prices from a July record. Limited Brands Inc., owner of the Victoria's Secret lingerie chain, has led the advance with a 23 percent gain after posting profit that topped analysts' estimates and predicting full-year earnings will exceed its earlier projections.
An index of technology shares in the S&P 500 has had the second-best return in August with a 3.7 percent gain through yesterday, led by a 44 percent jump in Advanced Micro Devices Inc.
Banks, brokerages and insurers have fared the worst in August, with the S&P 500 Financials Index down 5 percent in August through yesterday on concern a government bailout of Fannie Mae and Freddie Mac will wipe out shareholders. The two largest U.S. mortgage-finance companies fell more than 40 percent each in August through yesterday.