The economy, while still struggling to pick up momentum following the Great Recession, grew at a faster pace than economists had forecast in the second quarter. There was also an encouraging report on hiring.
The news on growth was encouraging, said Peter Cardillo, chief market economist at Rockwell Global Capital, because it suggested the economy is recovering strongly enough to grow without stimulus from the Federal Reserve. The central bank is buying $85 billion of bonds a month to hold down interest rates and encourage borrowing.
"We did get some surprisingly strong economic numbers today," said Cardillo. "The market is taking this news optimistically. It points to the economy not needing crutches anymore."
The U.S. economy expanded at an annual rate of 1.7 percent from April through June as businesses spent more and the federal government cut less spending, the Commerce Department said Wednesday. Economists had expected growth of 1 percent for the period, according to the data provider FactSet.
Investors were also waiting for word from the Fed later Wednesday. The U.S. central bank will release an updated policy statement after concluding its latest two-day meeting.
The Dow Jones industrial average rose 58 points, or 0.4 percent, to 15,576 as of 12:30 p.m. Eastern Daylight Time. The Dow is on its way to beating its previous record high close of 15,567 reached on July 23.
The Standard & Poor's 500 index rose seven points, or 0.4 percent, to 1,694. The Nasdaq composite gained 16 points, or 0.6 percent, to 3,636.
On the last trading day of July, the Standard & Poor's 500 index was up 5.3 percent for the month. If it holds those gains, the index will log its best month since Oct. 2011. The stock market has surged in July after Fed Chairman Ben Bernanke assured investors that the central bank was in no hurry to withdraw its stimulus.
Investors also reacted to the economic growth report by selling bonds. The yield on the 10-year Treasury note rose to 2.67 percent from 2.61 percent the day before, and is close to its highest level in two years. The note's yield, which moves inversely to its price, has risen this year on signs that the economy is improving.
Investors tend to sell ultra-safe U.S. government bonds, forcing yields to go higher, when they anticipate a pickup in economic growth. Investors are also expecting that improving U.S. growth will prompt the Federal Reserve to ease back on its bond-buying program.
The encouraging news on hiring came ahead of the government's monthly jobs survey due out Friday.
U.S. businesses created a healthy 200,000 jobs this month, payroll company ADP said, as companies hired at the fastest pace since December. ADP also raised its estimate of the number of jobs the private sector created in June.
Investors were also tracking company earnings.
Comcast rose $2.16, or 5.8 percent, to $39.42 after the parent company of the NBC network and Universal Studios reported earnings and revenue that exceed analysts' expectations in the second quarter.
Software company Symantec, which makes the Norton antivirus software, surged after the company reported earnings and revenue that beat analysts' forecasts. The stock rose $1.84, or 7.6 percent, to $26.19.
Analysts are currently forecasting that second-quarter earnings rose an average of 4.75 percent for S&P 500 companies, according to S&P Capital IQ. That would be the slowest rate of growth in three quarters.
In commodities trading, the price of oil rose $1.17, or 1.1 percent, to $104.25 a barrel. Gold dropped $14.50, or 1.1 percent, to $1,310.60 an ounce.
Among other stocks making big moves:
- Air Products & Chemicals rose $2.97, or 2.8 percent, to $108.50 after the Wall Street journal reported that activist investor William Ackman had bought a 9.8 percent stake in the gas company.
- Herbalife rose $5.16, or 8.7 percent, to $65.25 after CNBC reported that the veteran hedge fund investor George Soros had taken a stake in the company. Herbalife has been at the center of a battle between investors Ackman and Carl Ichan, who are taking opposing positions in the stock.