NEW YORK (MarketWatch) — U.S. stocks rallied Friday, lifting the Dow Jones Industrial Average and the S&P 500 to record levels, after a government report showed the economy grew at its fastest pace in two years last quarter.
The U.S. economy expanded at an annual rate of 4.1% in the third quarter due to stronger consumer spending and business investment than previously reported, according to newly revised data. Investors greeted the upward revision to the gross domestic product as a welcome backdrop for future earnings growth.
Reuters 
Enlarge Image Twitter CEO Dick Costolo is interviewed before the Twitter Inc. IPO on the floor of the New York Stock Exchange in New York, Nov. 7. The Dow Jones Industrial Average (DJIA) closed at a record level for the third day in a row. The Dow rose 42.06 points, or 0.3%, to 16,221.14 and gained 3% over the week. That was its best week since September 13. In terms of point gain, it was the best since early January.
The S&P 500 index (SPX) ended the session off its intraday highs but still at a record closing level. The benchmark closed 8.72 points, or 0.5%, higher at 1,818.32 and recorded a 2.4% weekly gain after two straight weeks of losses. The Nasdaq Composite (COMP) rallied 46.61 points, or 1.2%, to 4,104.74 and added 2.6% over the week.
S&P 500 home-builder stocks gained the most over the past week, rising 6.1%. Industrials and materials sectors added 3.3% and 2.8% in the past five days respectively.
/quotes/zigman/477673/delayed/quotes/nls/xhb XHB 32.14, +0.40, +1.26% SPDR S&P Homebuilders ETF
"Now that all the distractions are behind us — Affordable Care Act and its botched implementation, the budget debate, debt ceiling, and this week the Fed—it seems like the markets can finally focus on fundamentals," said Drew Wilson, investment analyst at Fenimore Asset Management.
"Today's upward revision to GDP along with earlier economic data shows that the economy is recovering and it is a big positive for markets. As multiples are thinly stretched, earnings power will now come from stronger growth," he added.
Thursday saw a mixed trading session, with the Dow average closing at its 46th record of the year, while the two other benchmarks inched lower. Earlier in the week, the U.S. indexes soared as investors interpreted the Federal Reserve's decision to begin tapering bond purchases in January as confidence in the underlying strength of the economy.
The buzz : MarketWatch's Shawn Langlois writes that the end-of-week brought quadruple witching, the last trading day for various options and futures. "So, we might see a pickup in volume and volatility for what would otherwise be a sleepy time of year."
The comment : "If there are any doubts that the Fed made the right decision on Wednesday to begin tapering, let them be laid to rest. The final reading for third quarter U.S. GDP came in much better than expected at 4.1% growth, revised up from 3.6%," Douglas Coté, chief market strategist at ING U.S. Investment Management, wrote in a note. "While the Fed was correct to hand the baton over to the market, it will not be without consequence. The Fed has been managing market volatility, so anticipate an increase to more normal levels. However, the economy is strong enough to stand on its own two feet, and we are winding down 2013 in better shape than when we began," he added.
In corporate news , several companies reported quarterly results before the markets open.
BlackBerry (BBRY) shares initially dropped after the company reported a bigger a third-quarter loss than expected. However, shares rallied 15.5% after the firm also announced it had entered into a five-year strategic partnership with Foxconn to make phones for Indonesia and other fast-growing markets.
Walgreen Co. (WAG) shares fell initially but rebounded to end up 3.7% after the drugstore chain's fiscal first-quarter profit met estimates. Earnings rose to $695 million, or 72 cents a share, from $413 million, or 43 cents a share, a year earlier. Chief Executive Greg Wasson said margins were affected by generics.
Shares of CarMax Inc. (KMX) fell 9.4% after the used-car seller's third-quarter profit missed Wall Street's expectations. Profits rose to $106.5 million, or 47 cents a share, from $94.7 million, or 41 cents a share, in the year-ago period. Revenue rose to $2.9 billion from $2.6 billion.
Red Hat Inc. (RHT) surged 14% after the software firm on late Thursday said fiscal third-quarter profit rose 50%.
Shares of Carnival Corp. (CCL) (UK:CCL) gained 2.1%, adding to gains from Thursday when the cruise-line operator reported fourth-quarter earnings.
In other financial markets
Chinese stocks closed at 17-week low, while the rest of Asia was mixed and European stock markets scored the best week since April.
Gold rebounded from the previous session's losses and reclaimed $1,200-an-ounce level, while most metals prices rose. Oil futures slipped and the dollar fell against most rivals.
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