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US stocks rise for a second day; yields slip

NEW YORK (AP) — The U.S. economy slowed down, but the stock market went up for a second day in a row on Wednesday.

The gains were decisive. The Dow Jones industrial average was up by more than 100 points, and all 10 sectors in the Standard & Poor's 500 index rose.

The appraisal of the economy was just as clear: Annual growth slowed to 1.8 percent in the first three months of the year from the government's previous estimate of 2.4 percent, a worrisome sign that consumers have cut back on spending.

The divergence of stocks and growth might seem counterintuitive, but analysts said there was a method to the supposed madness.

The slower economic growth made traders and investors less anxious that the Federal Reserve will end its economic stimulus too soon. They also realized that they dumped too many stocks last week when they panicked over the Fed saying it could yank away its easy money policies by the middle of next year.

As a result, they bought up battered stocks at a good price Tuesday and Wednesday, analysts said.

Investors also bought U.S. government bonds, pushing yields lower. The yield on the benchmark 10-year Treasury note fell for the first time in more than a week.

"The sell-off was a little bit overdone," said David Coard, head of fixed-income sales and trading at Williams Capital Group in New York. "Sometimes you've got to take a breather."

Rising demand for the 10-year Treasury, which sets interest rates for consumer loans, means investors aren't so worried that the Fed will throttle back on purchasing $85 billion in long-term bonds each month. That program that has boosted the economy and pushed investors into stocks.

Investors had been hastily selling bonds in recent weeks in anticipation of the Fed buying fewer of them.

The Dow Jones industrial average was up 135 points, or 0.9 percent, to 14,896 in the early afternoon. Boeing led the Dow higher with a jump of $1.93, or 2 percent, to $100.60.

The Standard & Poor's 500 was up 14, or 0.9 percent, to 1,602. The Nasdaq composite index was up 26 points, or 0.8 percent, to 3,374.

The yield on the 10-year Treasury note, a benchmark for many kinds of loans, fell to 2.56 percent from 2.61 percent late Tuesday. The yield was 2.19 percent on June 18, the day before the Fed said it could stop buying bonds by the middle of next year.

The price of gold fell $45, or 3.6 percent, to $1,229 an ounce, its lowest price in three years. It was another sign that investors are feeling more optimistic. Investors tend to buy gold when they're nervous about returns in other investments.

The Fed has had an outsized influence on the market in recent weeks. Investors have pitched stocks back and forth as they tried to figure out if the Fed will end its efforts to prop up the economy too soon.

From May 22, the day Fed Chairman Ben Bernanke first said the central bank might soon rein in bond buying, through Tuesday, the market had 16 triple-digit swings in 24 trading days. Seven of those big swings were up, and nine were down.

The Dow still hasn't entirely recovered from the turmoil: It's down about 3 percent since May 21.

Chip Cobb, senior vice president of BMT Asset Management in Bryn Mawr, Penn., predicted a volatile summer for the market, though he blamed it on the upcoming earnings season and not the Fed. Companies will start to report second-quarter results in early July.

Analysts currently expect earnings to grow about 3 percent, though that is down from estimates as high as 15 percent a year ago, according to S&P Capital IQ. Revenue is expected to grow just 0.5 percent.

"We're not seeing any significant bottom-line growth," Cobb said. "It's all been cost-cutting measures."

Friday is also the last trading day for the second quarter, which could make the market's moves even more erratic. Money managers will be looking to get out of their holdings and book profits for clients before then.

Among companies making big moves:

—Gun manufacturer Smith & Wesson fell after quarterly revenue missed analysts' forecasts. The stock fell 31 cents, or 3.1 percent, to $9.68.

—Uniform company UniFirst fell after quarterly revenue missed analysts' expectations. Shares fell $5.84, or 5.8 percent, to $89.81

—Adobe, maker of Photoshop, Illustrator and other design software, rose after a Jefferies analyst upgraded the stock to "Buy" from "Hold," praising its shift to an online, subscription-based model. Shares rose $1.29, or 2.9 percent, to $45.66.

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