U.S. economic growth in the second quarter far exceeded the previous estimate, according to a report released by the Department of Commerce, with the better than expected growth primarily due to an upward revision to exports.

The report showed that gross domestic product increased at an annual rate of 3.3 percent in the second quarter compared to the advance estimate of 1.9 percent growth. Economists had been expecting GDP growth for the quarter to be revised up to 2.7 percent.

In a note to clients, Joel Naroff, Chief Economist at Naroff Economic Advisors, noted that the data showed that "the economy actually expanded quite solidly in the spring." Looking ahead, Naroff stated, "We could post a little slower, but not disastrous rate during the second half."

Separately, the Labor Department released its report on initial jobless claims in the week ended August 23rd on Thursday, showing that jobless claims fell in line with economist estimates compared to an upwardly revised reading for the previous week.

Stocks saw additional buying interest as crude prices turned lower after earlier topping $120 a barrel as traders showed they felt a recent rally may have been overdone. Light sweet crude for October delivery moved to $117.05 a barrel, down $1.11 on the session. Oil hit as high as $120.50 amid concerns Tropical Storm Gustav could cause problems in the Gulf of Mexico's oil region.

In other news, Fannie Mae (FNM) revealed major changes to its top management after the closing bell on Wednesday. The mortgage backer appointed David Hisey as Chief Financial Officer, Peter Niculescu as Chief Business Officer and Michael Shaw as Chief Risk Officer.

Fannie Mae said the senior executive appointments, which are effective immediately, were aimed at overseeing and implementing its recently announced capital management and credit loss reduction plan.

At the same time, a Lehman Brothers analyst cast further doubts that Fannie Mae and Freddie Mac (FRE) will need a government bailout any time soon. The analyst stated in a research note that Fannie Mae should get through the current housing cycle without the need to raise more capital. The same analyst also noted that Freddie Mac should be able to adsorb two more weak quarters before its capital base falls below government mandates. Freddie Mac has already committed to raise another $5.5 billion.

Meanwhile, Bond insurer MBIA Inc. (MBI) said late Wednesday that its insurance subsidiary MBIA Insurance Corp. will reinsure $184 billion of investment grade U.S. public finance bonds insured by its competitor Financial Guaranty Insurance Co., or FGIC.

The deal resulted from a competitive process undertaken at the direction of the New York State Insurance Department and is seen as possibly enabling FGIC to avoid bankruptcy. As per the deal, MBIA will receive unearned upfront premiums, net of a ceding commission paid to FGIC, of about $741 million in connection with the reinsurance.

The major averages saw additional buying interest in late day trading, helping the Dow and the S&P 500 to close at their intraday highs. The Dow closed up 212.67 points or 1.9 percent at 11,715.18, the Nasdaq closed up 29.18 points or 1.2 percent at 2,411.64 and the S&P 500 closed up 19.02 points or 1.5 percent at 1,300.68.

In overseas trading, stock markets across the Asia-Pacific region closed mixed on Thursday after seeing seesaw trading. Meanwhile, the major European markets ended the session higher, reversing some of the losses posted in the past two sessions.

In the bond market, treasuries ended Thursday's session on the downside. The benchmark ten-year note saw weakness through the morning, but it pared most of its loss following a government auction of five-year notes. Subsequently, the yield on the ten-year note closed up 2.3 basis points at 3.795 percent.

Airline stocks turned in some of the best performances, boosted by the sharp drop in oil prices. The Amex Airline Index ended the session up 8.7 percent, reversing nearly three day's worth of declines. With the gain, the index climbed off of the three-week closing low set on Wednesday.

Within the airline sector, UAL Corp. (UAUA) announced plans on Wednesday to cut 1,550 flight attendant jobs as it reduces flying in the fall. The job cuts equal about 10 percent of its cabin work force. Shares of the airline closed up 11.3 percent.

A day after the Mortgage Bankers Association released its weekly application survey showing a slight increase in mortgage applications, housing stocks closed sharply higher as well. The Philadelphia Housing Index saw a gain of 4.7 percent, setting a six-week closing high.

Bank stocks also saw significant buying interest. The S&P Bank Index closed up 5.4 percent, with Fannie Mae and Freddie Mac contributing to the strength. Fannie Mae closed up 22.7 percent, while Freddie Mac ended the session 11.2 percent higher.

Elsewhere in the financial sector, brokerage stocks posted notable gains as well, led higher by Merrill Lynch (MER) and Lehman Brothers (LEH). Merrill Lynch closed up 8.9 percent and Lehman Brothers ended the session 7.4 percent higher, contributing to a 4 percent gain by the Amex Securities Broker/Dealer Index.

Other stocks that showed notable strength include real estate, defense and retail stocks. The Morgan Stanley REIT Index closed up 3.1 percent, the Philadelphia Defense Index closed up 2 percent and the S&P Retail Index closed up 2.1 percent.

Within the retail sector, Tiffany & Co. (TIF) saw significant buying interest after the company reported higher second quarter earnings, driven by strong sales growth in the Asia-Pacific and European regions combined with higher operating margins. The company also lifted its full-year earnings outlook. The stock ended the session 10.7 percent higher.

On the other hand, oil and oil service stocks ended the session with notable losses, hurt by the drop in oil prices. The Amex Oil Index closed down 0.7 percent, compared to a 1.2 percent decline by the Philadelphia Oil Service Index.

Looking ahead to Friday, the Department of Commerce will release its data on personal income and spending. Economists expect personal income to decrease by 0.2 percent in July after posting a 0.1 percent increase in June. On the spending side, economists expect personal spending to show 0.2 percent growth.

Additionally, the National Association of Purchasing Management - Chicago will release its index on business conditions in the Chicago area while the University of Michigan releases the results of its consumer sentiment survey.

On the earnings front, Dell (DELL) is scheduled to release its second quarter results after the closing bell on Thursday. Analysts expect the computer maker to report earnings of $0.36 per share, compared to a profit of $0.32 per share in the previous year.

Novell (NOVL), PetSmart (PETM) and Sigma Designs (SIGM) are scheduled to report their quarterly results after the closing bell as well. Copyright(c) 2008 RealTimeTraders.com, Inc. All Rights Reserved