The release of twin inflation gauges that undercut most projections unleashed an explosive rally in U.S. stocks and bonds Thursday. The move in share prices was extremely broad, came on exceptional volume, and featured leadership from the financial and retail sectors.
At the close of trading on Wall Street, the Dow Jones industrial average was up 227.64 at 10,622.53, extending Wednesday's 92-point gain. The Standard & Poor's 500 rose 45.72 to 1,342.43, and the Nasdaq composite index rose 71.27 to 2,873.79.
The third-quarter employment cost index, a favorite indicator of Fed Chairman Alan Greenspan, rose 0.8 percent, against expectations of a 0.9 percent rise. Greenspan is expected to speak later in the day.
Meanwhile, third-quarter gross domestic product grew 4.8 percent compared to predictions of a 4.2 percent growth rate. The expansion is the fastest pace this year, following a sluggish 1.9 percent rate of growth in the April-June quarter.
A big positive was the GDP price deflator, an important measure of inflation. It increased 0.9 percent, well less than the expected rise of 1.5 percent.
Financial markets have been jangled in recent weeks over fears that the economy is growing so rapidly that the Federal Reserve could step in and raise interest rates for a third time this year.
"The only problem with the [day's economic data] is that it goes against the Fed's objective to slowing growth to their implicit target of 3 percent," said Tony Crescenzi, chief bond market strategist at Miller Tabak & Co. "Thus, a Nov. 16 rate hike is still on."