Financials Forge Gains, Oil Foiled

Stocks were buoyed Thursday by a second straight day of positive economic data and lower energy prices.

Investors got quite a surprise when the Commerce Department announced a bigger-than-expected upward revision of GDP growth to 3.3% annualized rate in the second quarter. Economists had been expecting the revision to come in at 2.7%. The Department of Labor also announced that initial jobless claims for the last week had fallen slightly to 425,000. Meanwhile, energy prices came down during the session. Traders had been pushing crude and natural gas higher as Tropical Storm Gustav showed signs of strengthening en route to energy platforms in the Gulf of Mexico. But according to Bloomberg, the International Energy Agency said it would tap strategic reserves if, indeed, the storm knocked out significant energy assets. Government data also showed that natural gas supplies rose almost double the amount that is typical for this time of the year. That sent the price of crude down $2.55 per barrel to close at the $115.60 level.

The Dow Jones Industrial Average surged 213 points to close at 11,715.

Fannie Mae (FNM) and Freddie Mac (FRE) continued to rebound. Late Wednesday Fannie's chief executive office, Daniel Mudd, replaced three executives in an effort to shake up his management ranks and restore investor confidence. Fannie's shares gained 15.4%; Freddie moved up 9.3%. The gains contributed to a broader rally in financials. MBIA (MBI) gained when it announced a deal to reinsure municipal bonds. Lehman Brothers (LEH) jumped when the New York Times (NYT) reported the company may cut costs by laying off 1,500 workers. The company may also be close to selling its investment management business.

Those stocks helped the SPDR KBW Capital Markets ETF (KCE) add 4.2%. The iShares Dow Jones U.S. Broker-Dealers fund (IAI) jumped 4.2%.

Fannie's and Freddie's improved standing also cheered up home builders. The iShares Dow Jones U.S. Home Construction fund (ITB) increased 5.9%.

Traders had been bidding up commodities on concerns Gustav would intensify in the Gulf of Mexico. But the promise supplies, if needed, from overseas reserves seems to have spooked them a bit. The United States Natural Gas ETF (UNG) dropped 6.3% in heavy trading. The United States Oil fund (USO) pulled back 2.4%.

Earnings & Conference Calls
Friday: Knightsbridge

Economic Data
Friday
8:30a.m. July Personal Income
8:30a.m. July Personal Spending
9:45a.m. August Chicago PMI

A look at how the industry's most popular ETFs did on Thursday.