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Stocks Rally

Stocks streaked higher on Thursday as investors shook off the accounting-scandal blues to focus on some good news -- including a report that the U.S. economy grew at its fastest pace in more than two years in the first quarter.

The Dow Jones industrial average jumped 149.81 points, or 1.64%, to 9,269.92. The Nasdaq composite index was higher by 29.89 points, or 2.09%, to 1,459.22. The Standard & Poor's 500-stock index rose 17.11 points, or 1.76%, to 990.64.

One catalyst was the Commerce Department's report early Wednesday morning that U.S. gross domestic product (GDP) raced ahead at a 6.1% pace in the first quarter, which was higher than an earlier estimate of 5.6%. The data suggest the economic recovery is well underway.

Investors will have a new stack of economic reports to sift through on Thursday including readings on personal income in May, and June reports on regional manufacturing activity and consumer sentiment. Personal income is seen rising 0.4% from 0.3% in the previous month.

The Chicago purchasing managers index, a gauge of manufacturing activity, is forecast to show a reading of 60 vs. 60.8 in April. Any number over 50 still indicates an expansion. The University of Michigan sentiment index is also expected to decline slightly, to 90 from 90.8.

Few earnings reports are scheduled to be released on Friday. Among them is Nu Horizons Electronic (NUHC), an electronic components assembler and distributor.

Despite Thursday's strong showing, it was clear that investors remain tremendously edgy about the integrity of corporate financial statements a day after WorldCom became the latest company to reveal major accounting problems--this time to the tune of nearly $4 billion.

When rumors surfaced earlier in the session that General Motors (GM) had accounting irregularities, sold off. Wall Street recovered, however, after the carmaker said the rumors where unfounded and that it was not the subject of any accounting investigation.

Meanwhile, U.S. regulators charged WorldCom with fraud on Thursday in what could prove to be one of the biggest accounting scandals ever.

There was some upbeat stock news on Thursday. Drugmaker Pfizer (PFE) rose after saying it would buy back as much as $10 billion of its stock over the next two years and consider selling several units.

ConAgra Foods (CAG) posted 58% higher quarterly profits from growth in retail brands including Healthy Choice meals and Hunt's ketchup.

Stoking the computer chip sector was a note from Lehman Brothers saying semiconductor share prices are becoming "consistent with the slower growth that we expect over the next several years." The comments gave a boost to industry names like Micron Technology (MU).

And greeting card company American Greetings (AM) posted a net profit, reversing a losing trend.

But there was negative news, too. Moody's says it was reviewing advertising firm Omnicom Group's (OMC) debt rating because of a slowing ad market and the company's use of cash and debt to finance acquisitions.

In other corporate news, mobile phone company Motorola (MOT) said it would cut 7,000 more jobs from its global payroll and take $3.5 billion in restructuring charges.

On Wednesday, the Federal Reserve announced it was leaving the Federal funds rate at 1.75% and sticking to its neutral monetary policy bias, as expected.

In other economic news Thursday, U.S. initial jobless claims fell 10,000 to 388,000 for the week ending June 22 from an upwardly revised 398,000 from the prior week while continued claims also fell to 3.71 million from 3.75 million. Standard & Poor's economic research unit MMS says overall this is a sign of a bit more constructive labor trends.

Treasury Market

Treasuries ended lower in price. MMS says the lack of any hint of an easing in yesterday's Fed statement, the rebound in equities, and the stronger than expected data were the catalysts for Thursday's correction. MMS says Fed funds futures are now showing a steady Fed stance for the most of the rest of the year, with rising potential for a rate hike late in the year.

World Markets

In London, the Financial Times-Stock Exchange 100 index was up 9.60 points, or 0.21%, to 4,540.60 in a bit of a rebound from Wednesday's slide. But the market was restrained by a report that first quarter UK business investment fell 3.1%, and an official's statement that the Bank of England is looking to raise rates in the near future.

France's CAC 40 gained 41.65 points, or 1.13%, to 3,742.78 as the French manufacturing confidence index rose in June. Bonds were lower as stocks rebounded.

Germany's DAX index was up 160.38 points, or 3.91%, to 4,259.43 in a short covering rebound as U.S. stocks advanced. There was little reaction to a report that German machinery orders fell.

Markets in Asia finished higher. In Japan, the Nikkei 225 index closed up 187.04 points, or 1.86%, to end at 10,261.60 on the back of futures-led buy-backs after a sharp decline on Wednesday.

In Hong Kong, the benchmark Hang Seng index ended up 162.17 points, or 1.57%, at 10,518.09.

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