Stocks rally after weak GDP

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Bad news is good news?

U.S. stocks rose sharply Wednesday as investors bet the weak GDP reading would keep the Fed's stimulus going.

The Dow Jones industrial average jumped 150 points, or 1%. The Nasdaq gained 0.9%, while the S&P 500 jumped 1%.

Markets have been volatile lately, driven largely by fears that the Federal Reserve could begin to ease its stimulus measures by the end of the year. (Investors yank record $62 billion from bonds)

But those fears took a backseat following the Commerce Department's worse-than-expected report on first-quarter gross domestic product, which showed the economy grew just 1.8% during the first quarter. The prior estimate showed an annual increase of 2.4%, and economists were expecting that figure to hold.

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"There is a clear disconnect from what the Fed is reviewing and Main Street is living," said Todd Schoenberger, managing partner at LandColt Capital, in a client note. "The pathetic part of it all is Wall Street will see this as good news as stocks will most likely rally on hopes of an extended period for more bond buying."

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Gold slumps: Gold prices fell more than 4% to to a 34-month low of $1,223.20 an ounce, before trimming some of those losses.

Gold has been dragged down by the market rout that accompanied Fed chairman Ben Bernanke's comments last week about potentially pulling back on bond buying later this year.

Gold mining companies Randgold Resources (GOLD) and Barrick Gold (ABX)fell 5% and 8%. The SPDR Gold Shares Trust (GLD) ETF fell 4%.

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What's moving: Shares of Smith & Wesson (SWHC) declined even after the gunmaker reported record sales and vowed to ramp up manufacturing.

General Mills (GIS) slipped after the food company reported earnings in line with forecasts but a weak guidance for the year.

Shares of Apollo Group (APOL), which owns for-profit University of Phoenix, slid after the company reporting disappointing quarterly profits.

Monsanto (MON) reported better-than-expected earnings and reiterated its outlook, and shares turned higher.

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