Wall Street gains as economy grows faster than expected

NEW YORK - U.S. stocks rose on Friday, as unexpectedly strong data on economic growth increased confidence that the recovery is   accelerating.

The Dow added 42 points to push deeper into record terrain, finishing at 16,221, the third day in a row the index has reached a new high. The S&P 500 also hit a new high, closing at 1,819, up nine points, while the Nasdaq composite index also rose. 

The benchmark S&P 500 has soared more than 27 percent this year and is on track for its best year since 1997. The Fed's aggressive economic stimulus program has been the major catalyst for this year's rally.

Propelling today's gains was an upward revision in the federal government's initial estimate of growth from July through September. Gross domestic product grew at an annual rate of 4.1 percent in the third quarter, the fastest pace in almost two years, and exceeding the 3.6 percent pace reported earlier this month.

Business spending was also stronger than previously estimated. Until recently, investors have viewed positive data as a negative, as it suggested that the Federal Reserve would begin to trim its stimulus program. The central bank had said it would start tapering its monthly bond buying when certain economic indicators met its targets.

The Fed, however, on Wednesday said it would pare its market-friendly monthly asset purchases by $10 billion to $75 billion, starting in January. It also suggested that its key interest rate would stay at rock bottom longer than previously promised.

"But now, there's no real risk that there will be more tapering any time soon, and on top of that, growth is absolutely stronger than many were expecting."

Fed Chairman Ben Bernanke said that if U.S. job gains continue as expected, then the bond purchases would be cut at a "measured" pace through much of next year, and would probably be wound down "late in the year, certainly not by the middle of the year."