NEW YORK - Wall Street extended its record-setting rally Wednesday as a sharp drop in oil prices and a surprise jump in the nation's gross domestic product encouraged more buying. The Dow Jones industrials and the Standard & Poor's 500 index both reached new 3 1/2-year highs.
The market's buying momentum surged when crude oil futures plummeted in response to the Energy Department's report of an increase of 2.1 million barrels in the nation's petroleum reserve last week. Demand for gasoline also fell. Shortly after the report, a barrel of light crude was quoted at $44.24, down $1.52, on the New York Mercantile Exchange.
Wall Street also welcomed the Commerce Department's final third-quarter GDP reading, which rose to 4 percent from previous estimates of 3.9 percent.
''Right now, the market is moving on any headline that moves over the wires, and right now the news is pretty good,'' said Jack Caffrey, equities strategist at J.P. Morgan Private Bank. ''That's what happens in a slow week, like we're having. We'll probably drift higher this way until earnings season next month.''
The Dow rose 56.46, or 0.52 percent, to 10,815.89, surpassing the 3 1/2-year high reached Tuesday. The Dow last closed above 10,800 on June 13, 2001.
Broader stock indicators were moderately higher. The S&P 500 was up 4.12, or 0.34 percent, at 1,209.57, bettering the 3 1/2-year high set last Wednesday. The Nasdaq composite index gained 6.12, or 0.28 percent, to 2,157.03, less than six points off its multiyear high set last week.
The GDP report gave many investors hope that the fourth-quarter reading will be stronger than expected. Analysts had feared that low job growth high energy prices would stifle economic growth. Oil prices, in particular, were seen as an extra drain on consumers' incomes, but the Commerce Department figure, along with the Energy Department's inventory report, assuaged some of those concerns.
''Any time you're up the day after you set new highs, that's a great sign,'' said Neil Massa, equity trader at John Hancock Funds. ''Long term, of course, whether we can sustain it remains to be seen. But I do think that, without any major surprises, we'll be up the rest of the year.''
Investors also took note of the departure of Fannie Mae's chief executive Franklin Raines and chief financial officer J. Timothy Howard, hoping that the mortgage giant can now move beyond its accounting scandals. The company is the biggest player in the country's $8 trillion mortgage market.
Fannie Mae's stock has suffered since Sept. 22, when the company said the Securities and Exchange Commission was investigating its finances. It fell to a 52-week low of $63.40 on Oct. 4, but has recovered somewhat as the investigations continued. On Wednesday, news of the resignations sent shares of Fannie Mae climbing $1.57 to $71.92.
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