The Seven Most Traded Currencies in FOREX

Currencies are traded in dollar amounts called “lots”. One lot is equal to $1,000, which controls $100,000 in currency. This is what is known as the "margin". You can control $100,000 worth of currency for only 1,000 dollars. This is what is called “High Leverage”.

Currencies are always traded in pairs in the FOREX. The pairs have a unique notation that expresses what currencies are being traded. The symbol for a currency pair will always be in the form ABC/DEF. ABC/DEF is not a real currency pair, it is an example of a symbol for a currency pair. In this example ABC is the symbol for one countries currency and DEF is the symbol for another countries currency.

Here are some of the common symbols used in the Forex:

USD - The US Dollar EUR - The currency of the European Union "EURO" GBP - The British Pound JPN - The Japanese Yen CHF - The Swiss Franc AUD - The Australian Dollar CAD - The Canadian Dollar

There are symbols for other currencies as well, but these are the most commonly traded ones.

A currency can never be traded by itself. So you can not ever trade a EUR by itself. You always need to compare one currency with another currency to make a trade possible.

Some of the common PAIRS are:

EUR/USD Euro / US Dollar "Euro"

USD/JPY US Dollar / Japanese Yen "Dollar Yen"

GBP/USD British Pound / US Dollar "Cable"

USD/CAD US Dollar / Canadian Dollar "Dollar Canada"

AUD/USD Australian Dollar/US Dollar "Aussie Dollar"

USD/CHF US Dollar / Swiss Franc "Swissy"

EUR/JPY Euro / Japanese Yen "Euro Yen"

The listed currency pairs above look like a fraction. The numerator (top of the fraction or "left" of the / however you want to SEE it) is called the base currency. The denominator (bottom of the fraction or "right" of the /however you want to SEE it) is called the counter currency. When you place an order to buy the EUR/USD, for instance, you are actually buying the EUR and selling the USD. If you were to sell the pair, you would be selling the EUR and buying the USD. So if you buy or sell a currency PAIR, you are buying/selling the base currency. You are always doing the opposite of what you did with to base currency with the counter currency.

If this seems confusing then you’re in luck. You can always get by with just thinking of the entire pair as one item. Then you are just buying or selling that one item. Thinking like this will still enable you to place trades. You only need to be aware of the base/counter concept for Fundamental Analysis issues.

So why is it important to know about the base/counter currency? The base/counter currency concept illustrates what is actually taking place in a Forex transaction. Some of you reading this, know that short-selling was restricted in the stock market *(Short-selling is where you sell a stock/currency/option/commodity first and then try to buy it back at a lower price later). But in the FOREX you are always buying one currency (base) and selling another (counter). If you sell the pair you are simply flipping which one you buy and which one you sell. The transaction is essentially the same. This allows you to short-sell with no restrictions.

You want to be able to short-sell with no restrictions so you can make money when the market drops as well as when it rises. The problem with traditional stock market trading is that the market has to go up for you to make money. With FOREX trading you can make money in all directions.

Forex Nitty Gritty Review

Forex Nitty Gritty is a brand new forex course from Bill Poulos, but unlike many of the useless robots and systems that are currently flooding the market, this one is actually very good. I was lucky enough to get my hands on a review copy and have since spent many hours going through all of the materials, so I can now offer you my full review of Forex Nitty Gritty.

Forex Nitty Gritty Course Contents

The course itself basically comprises three separate components:

1. Comprehensive training videos and ebooks which will give you a complete education in forex trading (ideal for beginners).

2. An actual trading method that is both profitable and easy to follow. It can also be traded on any time frame (I'm currently using it myself on the 15 minute charts).

3. Ongoing training from a real-life forex trader which also includes daily videos of the trading method in action.

(The third component is an optional monthly service that you can subscribe to but you get 30 days free access to this service and you can simply cancel your subscription if you don't wish to continue after the 30 days are up).

Who Is The Course Aimed At?

Forex Nitty Gritty is primarily aimed at beginners but if you've been trading for a while and are still losing money overall, then you should also benefit from this course because not only does it cover all the basics of forex trading and give you some very sound advice, but it also provides you with a profitable forex strategy you can start using immediately.

I've been trading for years but I still picked up a few excellent tips from some of the more advanced training modules and I've also incorporated the trading strategy into my own trading because it is a great little system and compliments my main 4 hour trading method very nicely.

Is The Trading Method Easy To Use?

Yes it is one of the simplest methods you are ever likely to come across because it is based primarily on price action. The system is so effective because it always enters trades in the direction of the overall trend and therefore the odds are always in your favour.

The objective of the system is simple. It doesn't try and enter at the start of the trend and exit at the end of the trend. It simply aims to capture a large chunk of the middle part of the trend, which is a lot easier to do.

As I've already mentioned, you can in theory use this trading method on any time frame, but I personally use it on the 15 minute charts to trade the GBP/USD, EUR/USD and USD/JPY pairs (as well as the FTSE 100 and Dow Jones indices), and have been delighted with the results so far.

How Does Forex Nitty Gritty Compare With Other Products?

Well I get sent a lot of forex systems and robots by people wanting me to promote their product, and I can tell you now that most of them are complete garbage. This new product, however, is in a different league to these products because for a start it has been created by an actual trader (Bill Poulos) who has been trading the markets for over 30 years and knows more about the markets than most of us will ever know.

Furthermore for the small price of just $97, you are getting outstanding value for money because not only do you get a complete forex education but you also get a profitable trading strategy you can use to trade the markets (which actually generates profits, unlike most of the products out there).

Final Comments On Forex Nitty Gritty

Overall despite the dodgy name this is one of the most comprehensive forex courses you are ever likely to come across. I literally spent around 5 or 6 hours over the course of 2 days going through all of the training videos and materials prior to writing this review.

I also spent several hours back-testing the trading strategy and putting the system into practice, and can certainly recommend you add this system to your arsenal because it's one that is capable of generating profits on any time frame (although as with all systems it's not quite as reliable on the 1 minute and 5 minute charts because the trends are a lot smaller).

Overall I would certainly recommend the Forex Nitty Gritty course to anyone who is either interested in learning more about forex trading in general, or to anyone who is looking for a simple, but profitable trading system they can use to trade the markets.

If you want to find out more about exactly what's included in the course, you can do so by clicking on the following link:

Running A High Risk High Reward Forex Account

In this post I want to discuss the merits of opening a forex account specifically to place high risk high reward positions. Now before you dismiss this idea out of hand, please hear me out because this concept may not be as crazy as it sounds.

What I'm actually suggesting is that you open two forex accounts. The primary one should be used to trade your main forex strategy and should hopefully accumulate regular profits over time as a result of taking controlled positions. You should treat this account like you would your pension fund in that your ultimate goal is to grow your account by taking safe low-risk trades which over time will give you some very healthy returns.

The secondary one should be your high risk account. This account should be a fraction of the size of your main trading account, and should be financed by money you can afford to lose. The goal of this account is to identify set-ups that have a large pay-off of at least 4:1. For example you are looking to trade positions which could potentially move 400 points in your favour whilst using a 100 point stop loss.

Furthermore you will be risking your whole account on this trade, or as much as you are allowed by using leverage. The worst case scenario is that you lose all or most of the cash in your account but remember that this account should be very small anyway and it should be money you can afford to lose. I usually start off with no more than £200 in this high-risk account.

With this account I am looking to make at least £800 from a winning trade and while this may sound fanciful, it is not actually that difficult because you only need a success rate of 20% (equivalent to 1 winning trade out of 5) just to break-even. However if you get a couple of consecutive winning trades, your account can grow substantially.

Although this is a high-risk account, you should still take this account seriously. Use technical analysis along with support and resistance lines to place the odds in your favour and only trade those positions that are most likely to pay off. For this particular system I suggest you use some kind of breakout system on the daily or weekly charts because these time frames are the ones that will give you these substantial gains.

If you get it right with an account size of say £200, you could grow this into £1000 with one winning trade, and then you can either withdraw your winnings and start again, withdraw the initial £200 and look for another opportunity with the remaining £800, or you could look for an opportunity to turn the £1000 into £5000 (I actually achieved this feat a couple of years ago). If you lose with the initial trade, you have only lost £200 and can simply reload your account if you have any spare cash that you can afford to lose.

This strategy of having two types of account isn't for everyone of course, but as long as you have a primary low-risk account which contains the majority of your trading capital, then I don't think there's anything wrong with risking a tiny fraction of this capital in a high-risk account because you can make some substantial gains if you catch some of the sizeable moves that occur regularly on the daily or weekly charts.

Weekly Trading Update - May 18-22 2009

This week has been absolutely incredible and I'm pretty sure it's been my most profitable week ever. There was one solid trade on each one of the three major currency pairs that I trade (GBP/USD, EUR/USD and USD/JPY) and each one worked out perfectly.

The daily Supertrend was bullish on the GBP/USD and EUR/USD pairs and bearish on the USD/JPY pair so this dictated which way I should have been trading on the 4 hour charts, and thankfully there were EMA crossovers in the required direction on all three pairs.

The first crossover occurred right at the start of the week on Monday morning. The EMAs on the 4 hour GBP/USD chart crossed nicely upwards and I entered a long position in the afternoon after the price pulled back to 1.5272. I then closed half the position for 50 points and let the other half run, moving my stop loss to break-even.

My initial target was 1.55 but after it reached this target relatively easily I decided to move my stop loss up to 1.54 and set my target price at 1.56 which was automatically triggered on Wednesday. So this was an excellent result in itself (although it has of course gone up by another 350 points since then) but I had a similar outcome on the EUR/USD pair.

This crossover occurred on Tuesday morning and I was actually very lucky here because if I had got up earlier I probably would have entered a position at 1.3570 (which would have been taken out at break-even later on) but I switched on the computer, saw the crossover taking shape and managed to get in at 1.3552.

Anyway I ended up closing half the position for 50 points and letting the other half run, moving my stop loss up to break-even once more. The price did fall back a few times but thankfully it didn't quite manage to hit my stop loss and after this lucky escape I decided I was going to hold onto this position for as long as possible.

The price continued to soar and after it hit 1.38 on Wednesday evening I was tempted to close out but I held on for a bit longer and ended up closing out the position for 1.3883 for a profit of around 330 points.

The final position was on the USD/JPY pair, which crossed downwards in the early hours of Wednesday morning. Thankfully it took it's time and I managed to enter a short position in the morning at 95.66. I closed half the position for 40 points and let the other half run. I was going to hold out for 94 but when I was 100 points in profit I decided that was a good enough return and closed the position.

So overall it was an outstanding week and it's been long overdue because in recent weeks these EMA crossovers have fizzled out fairly quickly. The only downside is that there are unlikely to be too many set-ups next week, if any at all, so here's hoping we get some big reversals so we can start all over again.

(If you would like full details of my main 4 hour trading strategy you can access it by filling on the form above and subscribing to my newsletter).

Have a great weekend.

Forex Money Management

Forex money management is one of the most important things you can learn before you actually begin making live trades.

The money management principles discussed here will teach you how to avoid the costly mistakes many new traders make, often to the degree that they lose their entire investment on the first handful of trades.

Psychology is really the most important factor to money management in forex. You have to be able to separate yourself from any emotional attachment you may have to your money. This is not very easy to do, but it works and it can be done.

If you allow yourself to become emotional on a trade, you will not exit the trade properly, and this could mean holding on to a trade when you should have let it go, or letting go before the trade had a chance to turn profitable.

First and foremost, you should consider leverage and risk. It is advisable that you never risk more than two percent of your account balance on any trade. However, some go further and allow for as much as ten percent, but never more than that. This gives you the ability to withstand market fluctuations, and if the trade goes bad, you still have money to try again. You should never operate under the assumption that you will profit from every trade. You should also plan for losses. Therefore, most traders will tell you that the best thing to do is to keep your gains large and your losses small. Develop your trading strategy around this idea.

Keep track of your gains and losses. Keeping accurate and detailed records of your account activity will allow you to see whether or not the strategy is working, or if it needs to be re-built.

Never go blindly into trading without a way to keep track of results. You will lose all of your funds and never understand why it happened.

Finally, it is highly advisable that you first practice a strategy on a demo account. Nearly all brokers offer a virtual account whereupon you make trades in real-time, but with imaginary money, so nothing is risked. This is the best way to test a strategy before you put your real money on the line.

However, be careful, once again, of the psychology of trading. When you play with fake money, nothing is risked. When real money is on the line, you must not get emotional. If you do, you will find yourself with very different results, most likely losses, than you had with the demo account.

Stock Market Money Management Skills

Let's start by saying: You can't be afraid to take a loss. The investors that are the most successful in the stock market are the people who are willing to lose money.

Having a strategy and/or a specific philosophy is an excellent starting point to investing but it won't mean a thing if you can't manage your money. As I have said a million times: without cash, you can't invest.

Most investors spend far too much time trying to figure out the exact pivot point or perfect entry strategy and too little time on money management. The most important aspect to investing is cutting your losses, 90% of the battle is won by protecting your capital, regardless of the strategy.

Most successful money managers only make money 50-55% of time. This means that successful individual investors are going to be wrong about half the time. Since this is the case, you better be ready to accept your losses and cut them while they are small. By cutting losses quickly and allowing your winners to ride the up-trend, you will consistently finish the year with black ink.

Here are some methods that can help you with money management:

Set a predetermined stop loss (you must know where to cut the loss before it happens ¡°this will help control emotions when the time comes)." A 7-10% stop loss insurance policy is best. Tighten the stop loss range in down markets and loosen the range in strong bull markets.

Establish smaller positions if your account has had a recent losing streak (the losses may be telling you important information such as a critical turning point, it may be time to sell and get out).

If you think you are wrong or if the market is moving against you, cut your position in half ¡°this is the best insurance policy on Wall Street."

If you cut your position in half two times, you will be left with only 25% of the original position ¡°the remaining stock is no longer a big deal as your risk is very low."

If you sell out of a trade prematurely based on a minor correction, you can always reestablish the position again.

Initial position sizing plays a big part in money management ¡°don't take on too big of a position relative to your portfolio size. Novice investors should never use their entire account on one trade no matter how small the account

Know when you would like to get out of a position after a considerable profit has been made. Signs of topping could be a climax run, a spinning top or higher highs on lower volume.

Finally, cut any trade that doesn't act the way you originally analyzed it to act.

With these guidelines, you will be well on your way to solid money management skills that will help you profit in Wall Street year in and year out. Always remember, you are going to take-on losing trades at least half of the time. This is a tough concept to accept for most novice investors but it a fact. If you don't cut losses, you won't be investing for very long as you will run out of cash and the desire to continue to invest.

Fundamental Analysis On Forex Trading

It has become imperative for every forex trader to learn how to predict the price trend and which method or software is the best.

When you do forex trading, it is very important to understand the difference between fundamental analysis and technical analysis. A quick explanation of the difference among the two types of analysis is: fundamental analysis focuses on money policy, government policy and economic indicators such as GDP, exports, imports etc within a business cycle framework while technical analysis focuses on price action and market behavior, especially on chart and technical indicators.

Needless to say both schools are equally disparaging about the other, and both believe their techniques are infinitely superior. But the reality is that it has become increasingly difficult to be a purist of either persuasion. Fundamentalists need to keep an eye on the various signals derived from the price action on charts, while few technicians can afford to completely ignore impending economic data, critical political decisions or the myriad of societal issues that influence prices.

Generally speaking, fundamental analysis can only judge which direction the market will move, and technical analysis can supply both direction and rough currency rate.

Keeping in mind that the financial underpinnings of any country, trading bloc or multinational industry takes into account many factors, including social, political and economic influences, staying on top of an extremely fluid fundamental picture can be challenging. Meanwhile, forecasting models are as numerous and varied as the traders and market buffs that create them. Different people can look at the exact same data and come up with two completely different conclusions about how the market will be influenced by it. At the end, some may make huge profit and some lose their money. You can not say fundamental analysis is easy.

Remember, fundamental analysis is a very effective way to forecast economic conditions, but not necessarily exact market prices. For example, when analyzing an economist's forecast of the upcoming GDP or employment report, you begin to get a fairly clear picture of the general health of the economy and the forces at work behind it. However, you'll need to come up with a precise method as to how best to translate this information into entry and exit points for a particular trading strategy.

Tip: If you are new to do forex trading and do not trade frequently, you can mainly use fundamental analysis for your trading.

Don't disturb yourself by information overload. Sometimes traders fall into this trap and are unable to pull the trigger on a trade. Normally, your first feel is the answer for you to do forex trading. At that time, you are sure which currency is strong and which country's economy is good. The more simple, the more useful.

However, trading a particular market without knowing a great deal about the exact nature of its underlying elements is unbelievable. You might get lucky and snare a few on occasion but it's not the best approach over the long haul.

For forex traders, the fundamentals are everything that makes a country tick. From interest rates and central bank policy to natural disasters, the fundamentals are a dynamic mix of distinct plans, erratic behaviors and unforeseen events. Therefore, it is very important to understand fundamental analysis and use them on forex trading.

Forex Options Tips - Tips to Increase Profits and Decrease Risk!

If you have never considered sing Forex Options then you should. They can simply overcome the major problem most Forex traders face - getting stopped out by short term volatility...

A Forex Option gives you unlimited profit potential and your risk is simply the price you paid for the option. This means, prices can go anywhere in the short term but so long as the option trades above the price you bought it at, in rising market or below in a falling market you make money.

How many times have you been stopped out by short term volatility, only see the price go right back the way you thought they would, make thousands of dollars and your not in the trade?

It happens to most traders!

Picking the direction of the long term trend is easy; balancing the risk reward in the short term is the hard part. You want to be in the trend - but you don't want to have to worry about short term risk. Staying power is the key advantage Forex options give you.

Options are a great tool to limit short term risk - but you need to use them correctly and here are two simple tips.

1. Always Buy at or in the Money Options.

Never buy way out of the money options, as these are long shot bets.

Sure the profit potential is bigger, if the strike price is hit but the key word here is "if"; out of the money options, are the equivalent of outsider bets and the outsider doesn't normally win!

2. Get Time on your Side

The closer the option is to expiry, the more time decay plays a role in option value. Never buy options with less than 3 months to expiry, so you have plenty of time on your side.

Options the Ultimate Risk Control Tool!

Forex options are a powerful tool any Forex trader should look at to deal with volatility and gain staying power. The problem most of the time is not deciding where a currency will go long term but where to place your stop and options take care of this problem, by giving you staying power.

If you don't know much about options, then make them part of your essential Forex education and add a valuable tool, to your armoury for bigger Forex profits.

Forex Money Management - The Foundation For Huge Gains and Forex Trading Success

Most traders use solid Forex trading systems but they fail to poor money management and really poor money management is the reason most traders lose lets take a look at in more detail...

If you watch any good football team it will have a strong defence it keeps the team in the game, until the offence gets an opportunity. If a team falls to far behind it doesn't matter how good the attack is, the team will lose and it's the same in Forex trading you need to defend what you have and keep your losses small until you get good high odds opportunities.

In Forex trading lose 50% of your account and you have to make a 100% to get back to profit and that's hard!

In Forex trading picking trend direction is easy but getting in at the best risk to reward is hard. So what tips can I give you?

The first is to cut leverage sure most brokers give you 200:1 but 10:1 is really plenty for most traders. Leverage up to far and you will have to have your stop to tight and will get taken out by the market noise so cut back leverage.

Next don't put stops to close!

This isn't being rash but you need to have stops outside of random volatility, so you don't get clipped out. Even more important is never jack your stop up to far to lock in profit - leave it back and accept short term dips in equity, to make a longer term gain.

Most traders either use to much leverage or think by having stops close, they reduce their risk but they don't, all they do is increase the probability of being stopped out to 100%. Many traders calculate their risk reward as - their target minus their stop but this is just an opinion! It does not take into account the probability if the trade.

To Win You Need to Deal with Volatility

When I ask traders I teach, do they know anything about standard deviation of price?

They look at me with a blank look yet; this should be essential knowledge for any Forex trader's essential education - why?

Because it gives you the volatility of the market and allows you to place stops more effectively. If you don't know what it is, make it part of your essential Forex education and look up our other articles.

Here are some simple money management tips.

- Always assume the worst when you enter a trade and things can only get better, there is no sure fire winner!

- Never place stops inside random volatility

- Never leverage up to hilt, keep leverage low

- Never trail a stop to quickly give the market room to breathe

- Never trade in random time periods so no day trading or scalping!

- Be patient and wait for high odds trades

- Don't place mental stops, they affect discipline and you may let a loss run

- Risk reward is NOT Your target minus your stop! Don't fall into this common trap

- If in doubt get out - any doubts liquidate

In forex trading your only trading the odds, you need to preserve your equity above all else fall too far behind and you will never recover. Forex money management is the key to this and always keep in mind the old gamblers saying:

To bet and win you need to be at the table but you can't bet if you lose your chips!

Obvious really - but very true. The foundation of your success is sound Forex money management SO pay attention and make it part of your essential Forex education or lose.

Dealing With Online Forex Brokers

Online forex brokers can turn out to be your competitive advantage in the line of foreign currency trading. They are deemed as a valuable asset especially if you wanted to enter into a high stakes game of currency trading. Because of these, forex brokers are highly esteemed in the market and there are some misconceptions that have also been formed around them. With the industry booming, it's about time that some of those misconceptions be straightened out once and for all.


The Truth behind Trading with Brokers


Most of the time, we feel way too assured for our own good when we get the services of online forex brokers. We tend to feel that we are in the hands of experts so all we have to do is sit back and relax as they do all the needed work for us. So when things don't turn out quite the way we expect them to, we tend to put all the blame on the brokers. Sometimes we even feel cheated that we are paying for nothing. But the truth is that we are also to blame for the losses we incur.


All forex brokers know that in the trading arena, losses amounting to 95% are but a common thing. This is why most of them choose to abide by the rules of day trading. Exchanging currencies are very dynamic and at the end of the day, all your broker ever really does is to provide you with leads. The hand that still makes all the vital decisions is yours and not your broker.


Brokers and Offered Leverage


One of the selling points used by most forex brokers is the leverage they offer. Leverage is the profits that you can be promised by relying on just one forex broker alone. Some even go as far as giving 300:1 and unfortunately some people take the bait. In truth, 20:1 is the maximum that brokers can handle and assure you with. It's easy to believe that they can do it with a spectrum of trading methods but at the end of the day, keep in mind that these brokers are human too. They can only do so much to cover that much and also consider the fact that you may not be their only client.


Listening to Your Forex Broker


One of the great offers that a forex broker can perhaps give you as an extra benefit is their word of advice. You would especially appreciate this if you are new in the game. But the thing is, you should not swallow every piece of advice that your forex broker will give you. Online forex brokers are hired to help you find opportunities but they should never be the ones made to handle the course of your business. At the end of the day, you should still listen to your own gut feel and instincts.


Also, you should never buy most of the things that your forex broker tells you out of the context of work. As much as possible, keep your relationship at a professional level.

What is Forex ?

The Foreign Exchange market, also referred to as the "Forex" or "FX" market, is the largest financial market in the world, with a daily average turnover of approximately US$1.5 trillion. Foreign Exchange is the simultaneous buying of one currency and selling of another. The world’s currencies are on a floating exchange rate and are always traded in pairs, for example Euro/Dollar or Dollar/Yen.

PepsiCo offers to buy 2 bottlers for $6 billion

PepsiCo Inc.'s $6 billion bid to buy its two largest bottlers should make the owner of the Gatorade, Naked juices and Aquafina brands more nimble in a landscape where soft drinks have declined in popularity in favor of healthier options like water and juices.

The deals for Pepsi Bottling Group and PepsiAmericas would let PepsiCo control about 80 percent of its total North American beverage volume �� something the company and analysts said would streamline the process of getting newer or smaller products to stores.

Consumers could see products such as Izze sparkling juice and Naked fruit juices at more places, Chief Financial Officer Richard Goodman said, since the company would be able to negotiate with retailers directly rather than persuading the bottlers that now control most distribution to include smaller products in their network.

"There is a need to be more nimble given the increasing role of (non-carbonated beverages), retailer consolidation and the changing competitive landscape," PepsiCo Chairman and Chief Executive Indra Nooyi said.

The move shows how much the landscape has changed since 1999, when PepsiCo spun off Pepsi Bottling Group. At the time, the spinoff was a way for Pepsi to have a stake in a company that focused solely on making the soft drinks that dominated the market and were growing strongly.

Since then, though, soft drink sales have slowed, Pepsi added more non-carbonated beverages like Tropicana and Gatorade, and a different model is needed, Nooyi said.

"A move this big changes the entire landscape of the industry," said John Sicher, editor of the trade publication Beverage Digest. "Today the beverage business consists of a greater diversity of products, and PepsiCo needs more control and flexibility over the route to market for its brands."

Although ultimately the decision of what goes on store shelves lies with retailers, the move gives Pepsi more direction over its products by eliminating negotiations with independent bottlers and consolidating distribution.

The new system should improve the "speed of decision-making across the company and eliminate friction points resulting from competing manufacturing and distribution systems," Nooyi said. She said new products that start out small in one system could be switched to another with little trouble.

Pepsi now has three beverage businesses: a bottler-distributed soft drink business, a warehouse-delivered sports drink business and a warehouse-delivered juice business, said Deutsche Bank North America analyst Marc Greenberg. Consolidating them offers Pepsi cost savings, control over pricing and a more competitive system than its rivals, Greenberg said.

However, it also gives the company a larger stake in the more volatile bottler business, which is affected by packaging and other costs.

PepsiCo, which had been trying to cut costs, expects the deals to boost earnings by 15 cents per share when the cost savings are fully realized and save $200 million per year before taxes. Analysts say the savings could even be as much as $400 million.

Goodman, the CFO, said job cuts are probable in the consolidation but did not give an estimate. PepsiCo has laid off 3,500 employees and closed six plants as part of an effort to cut $1.2 billion in costs by 2011.

PepsiCo said it still expects earnings and revenue in 2009 to grow in the mid- to high-single digit range, excluding the stronger dollar and any impact of proposed deal.

Analysts speculated that Coca-Cola Co., the world's largest soft drink maker, may make similar moves with its bottlers since it faces the same challenges as Pepsi. It owns 35 percent of its largest bottler, Coca-Cola Enterprises Inc.

"We would expect Coke to follow," said Greenberg. "But the longer it waits ... the more it may cost: Advantage Pepsi."

Coca-Cola declined to comment.

PepsiCo currently owns 33 percent of Somers, N.Y.-based Pepsi Bottling group and 43 percent of PepsiAmericas, which is based in Minneapolis. It offered cash and stock worth 17 percent more than each stock's closing price on Friday for the stakes it doesn't own.

That equates to $29.50 per for share for Pepsi Bottling Group and $23.27 per share for PepsiAmericas. Both are evaluating the offer.

Bottlers have been raising prices, restructuring and cutting expenses to cope with weaker sales volumes and higher raw material costs. Last year, Pepsi Bottling Group's profit fell 70 percent, mainly due to a restructuring charge, as sales rose 2 percent. PepsiAmericas earnings rose 7 percent last year as revenue rose 10 percent.

PepsiCo Americas Beverages revenue fell 12 percent in the first quarter, as volume of carbonated soft drinks fell in the mid-single digit percentage range and sports drinks volume fell in the double-digit percentage range.

For the quarter that ended March 21, PepsiCo earned $1.14 billion, or 72 cents per share, down from $1.15 billion, or 70 cents per share, a year ago. That beat the 67 cents per share analysts were expecting.

Revenue slipped almost 1 percent to $8.26 billion. Excluding the stronger dollar's effect on international results, net revenue grew 6 percent.

Shares in Purchase, N.Y.-based PepsiCo fell $2.27, or 4.4 percent, to close at $49.86. Pepsi Bottling Group shares jumped $5.53, or 21.9 percent, to $30.73, while PepsiAmericas shares rose $5.16, or 26 percent, to $25.04.

Yahoo Domains to cut nearly 700 jobs after 1Q results fall

Yahoo Inc. will lay off nearly 700 workers after getting off to a bumpy start under a tough-talking new boss who has promised to engineer a long-awaited turnaround at one of the Internet's best-known franchises.

Neither the lackluster first-quarter results nor the job cuts announced Tuesday came as a surprise.

Analysts had already predicted Yahoo's three-year slump would worsen during the first three months of the year, and hints about the payroll purge were leaked to the media last week.

Investors drove up Yahoo's stock, extending a recent rally propelled largely by media reports that the company is getting closer to forging an Internet advertising partnership with Microsoft Corp. as the two rivals try to counter online search leader Google Inc.'s domination of the advertising market.

In a Tuesday conference call with analysts, Yahoo Chief Executive Carol Bartz declined to comment on the status of the Microsoft discussions.

This marks Yahoo's third round of mass layoffs in little over a year, but the first batch since the Sunnyvale-based company hired Bartz in January. The cuts will affect about 5 percent of Yahoo's 13,500 workers. The estimated 675 people people losing their jobs will be notified during the next two weeks.

Yahoo dumped about 1,000 jobs in February 2008 and another 1,500 or so late last year while co-founder Jerry Yang was still running the company. Yang stepped down, largely because he wasn't able to snap the company out of its financial funk during his 18-month tenure as CEO.

Although it remains one of the most popular destinations on the Internet, Yahoo's fortunes have been declining since 2005 as Internet search leader Google Inc. sucked up more advertising revenue and trendy new online hangouts like Facebook and MySpace lured away younger Web surfers.

Yahoo earned $118 million, or 8 cents per share, during the first three months of the year. That represents a 78 percent drop from net income of $537 million, or 37 cents per share, in the year-ago period.

Last year's results included a non-cash gain of $401 million. But Yahoo's profit this year still would have been lower even after subtracting last year's one-time boost.

The latest earnings matched the modest expectations among analysts surveyed by Thomson Reuters.

Revenue fell 13 percent to $1.58 billion. If not for the stronger dollar, the sale of an e-commerce site in Europe and the loss of some fees, Yahoo said its revenue would have been down by just 3 percent.

After subtracting commissions paid to its ad partners, Yahoo's revenue stood at $1.16 billion �� about $50 million below analyst estimates.

Management indicated that Yahoo's results will erode again the second quarter, with total revenue expected to range from $1.42 billion and $1.63 billion. Yahoo's revenue totaled $1.8 billion in last year's second quarter.

Yahoo shares still surged 79 cents, or 5.5 percent, in Tuesday's extended trading after rising 72 cents to finish the regular session at $14.38.

In remarks elaborating on the layoffs, Bartz indicated she is trying to focus Yahoo more on its strengths in online news, finance, sports, e-mail and Internet search, where it ranks a distant second to Google.

In the process, she thinks Yahoo can free up more money to expand those products around the world and possibly hire more workers in those areas.

Yahoo product managers, in particular, appear to be among the most likely to receive pink slips, based on Bartz's blunt comments.

"We sort of had one product management person for every three engineers, so we had a lot of people running around and telling people what to do, but nobody was doing anything," Bartz said.

Microsoft feels more recession fallout, sales drop

Microsoft Corp. said Thursday its quarterly revenue fell from the previous year for the first time in its 23-year history as a public company, while its profit dived 32 percent.

The shortfall illustrated the toll the recession has taken on the world's largest software maker, even though Microsoft remains one of the richest and most profitable companies. In January, Microsoft said it needed to resort to its first mass layoffs, cutting 5,000 jobs, and on Thursday it announced it would do away with merit pay increases for employees in the next fiscal year.

Microsoft did not issue earnings guidance for the rest of the year, and it offered no hope for a rebound in the current quarter.

"I didn't see any improvement at the end of the quarter that gives me encouragement that we're at the bottom and coming out of it," said Chris Liddell, Microsoft's chief financial officer.

Even so, Microsoft shares gained 2.6 percent in extended trading after the earnings report, having closed earlier at $18.92, up 14 cents.

Redmond-based Microsoft said that in its fiscal third-quarter, which ended March 31, profit was $2.98 billion, or 33 cents per share. In the same quarter of 2008, Microsoft earned $4.39 billion, or 47 cents per share.

Microsoft's profit included a $290 million charge for severance from some of the layoffs announced in January. The software maker also wrote down $420 million related to investments that lost value.

Excluding such items, Microsoft said it would have earned 39 cents per share, matching the estimate of analysts surveyed by Thomson Reuters.

Microsoft avoided a steeper drop in profit by slashing costs in several areas, such as sales and marketing, which it cut by 9 percent to $3 billion.

Revenue in the last quarter slipped 6 percent to $13.6 billion, missing analysts' expectations for $14.1 billion.

"I think it was a good quarter in a tough environment," said Taunya Sell, an analyst for Ragen MacKenzie, a division of Wells Fargo. They did "the two things you can do in a tough environment �� try to keep costs down, and make sure customers still want to buy your products."

Microsoft makes most of its profit selling the Windows operating system and business software such as Office, and those divisions have been hammered over the last six months as consumers and businesses sharply cut their technology spending. The holiday quarter, which ended in December, was the PC industry's worst in six years, according to research groups IDC and Gartner Inc. In the following quarter, computer shipments sank about 7 percent.

Even the brightest spot in the PC market �� tiny, recession-friendly laptops known as netbooks �� had a downside for Microsoft because those inexpensive computers run a cheaper version of Windows XP, Microsoft's last-generation operating system.

The Windows division's profit fell 19 percent to $2.5 billion, and its sales sank 16 percent to $3.4 billion in the last quarter.

The division that makes Office saw its profit drop 8 percent to $2.9 billion on revenue that declined 5 percent to $4.5 billion.

Both divisions were cushioned to some extent by businesses that renewed bulk software licenses at about the same pace as usual.

Microsoft's online advertising business widened its quarterly loss, and its entertainment and devices division, which makes the Xbox 360 game console and the Zune media player, swung to a loss from the prior year.

Microsoft said the current quarter would probably still be weak in the markets for PCs and computer servers. Other technology companies have offered mixed assessments about whether a recovery is in sight.

Last week, Intel Corp. Chief Executive Paul Otellini raised some hopes when he said the PC market had bottomed out in the first quarter.

And on Thursday, EMC Corp. CEO Joe Tucci predicted that spending on information technology "has reached or is very near the bottom" and should rebound in the second half of this year. He made those comments even as EMC reported that its first-quarter profit dropped 23 percent and the company planned more cost cuts.

Other executives have been more cautious.

"I don't know how someone could say we've hit bottom in the current economic climate," Dirk Meyer, the CEO of Intel's main rival, Advanced Micro Devices Inc., said Tuesday.

Even as Microsoft and EMC reported profit and revenue declines Thursday, two e-commerce companies fared better.

Leading online retailer Amazon.com Inc. said profit rose 24 percent and revenue jumped 18 percent. And Netflix Inc. posted a 68 percent leap in profit, as more people turned to its DVD-by-mail service as an affordable entertainment option during the recession.

Fed says gov't ready to save stress-tested banks

The government signaled Friday that some distressed banks will need to raise more cash to meet stricter standards it has set for the 19 financial firms that took its "stress tests" and suggested it's ready to step in with more federal help.

Federal Reserve officials held top-secret meetings with bank executives to give them preliminary findings of how each bank would fare if the recession got much worse. It reinforced the Fed's view that major financial firms are "too big to fail," and that the government must do whatever is necessary to save them.

"It appears 'too big to fail' is a fundamental philosophy," said Mark Williams, a finance professor at Boston University and former Fed examiner.

Fed officials told reporters that all 19 banks will be required to keep an extra buffer of capital reserves beyond what is required now in case losses continue to mount. That means some banks will likely have to raise additional cash.

But the Fed stressed in a statement that a bank's need for more capital reserves to meet the requirements should not be considered a measure of the "current solvency or viability of the firm."

Senior Fed officials also told reporters that regulators will keep a close eye on banks to make sure they have adequate capital to withstand further losses on mortgages and other bad assets as the recession drags on.

The tests of the 19 financial firms, which hold half the loans in the American banking system, are a centerpiece of the Obama administration's financial rescue plan. They were intended to boost confidence in the banking system by giving investors signals about the relative strength of the nation's largest financial firms.

The Fed is also using the results to determine which firms need to raise more money or take other action to strengthen their positions.

The government plans to announce the results of the tests May 4. By law, the banks cannot publicize the results without the government's permission, and the Fed itself offered little new information Friday. But Wall Street buzzed with anticipation, and most financial stocks rose. The Dow Jones industrial average added more than 119 points to close at 8,076.

In New York, Gary Cohn, the president of Goldman Sachs, met with Fed officials inside the iron-barred Federal Reserve Bank of New York, a neo-Florentine fortress that sits atop the world's largest gold repository.

Hours later, John Mack, the CEO of Morgan Stanley, arrived in a silver sedan with dark-tinted windows, showed his identification to security and entered the building. He left about 45 minutes later.

Critics remained concerned that the tests have had the opposite effect of what the government intended �� creating uncertainty that feeds market instability.

"I really don't think this is going to add transparency to the system," said Linda Allen, a finance professor at Baruch College. She said the tests are similar to bank examinations that are done regularly to ensure banks have enough money to absorb further losses.

In the tests, the Fed put banks through two hypothetical scenarios for what might happen to the economy.

One scenario reflects forecasters' current expectations about the recession. It assumes unemployment will reach 8.8 percent in 2010 and house prices will decline by 14 percent this year. The second imagines a worse-than-expected downturn: Unemployment would hit 10.3 percent and house prices would drop 22 percent.

Recent economic indicators suggest the economy is approaching the more severe of the two, said Paul Miller, an analyst with Friedman, Billings, Ramsey & Co.

"The question is, will the market accept the stress test as a realistic case?" he said.

Regulators also used the tests to examine the quality of banks' loans and other assets, according to Fed officials.

The tests could be especially hard on regional banks because some of them hold massive portfolios of mortgage and other loans in areas that have been hit hard by the foreclosure crisis. By contrast, Wall Street brokerages like Goldman Sachs and Morgan Stanley hold more of their assets in securities, which regulators feel have already been priced down in the market.

The Fed has several tools for shoring up bank finances. One is converting the Treasury Department's loans to the banks into shares of common stock. Another is forcing the banks to raise money in private markets or receive more money from Treasury's bailout fund.

In extreme cases, a rescue could include a government-backed merger, similar to what regulators did in helping Bank of America to buy Merrill Lynch and JPMorgan Chase & Co. to buy Bear Stearns.

Battling the worst financial crisis since the 1930s, the government has committed more than $11 trillion in loans, investments and other measures to prop up troubled institutions and stabilize the banking system.

For months, officials have put off questions about the banking system by saying they're awaiting the results of the tests. The delays have led investors to fret: If the tests show every bank to be strong, they will look like a whitewash and won't be taken seriously. Yet once investors can distinguish stronger from weaker banks, they could start fleeing from weaker banks.

News reports, including a confidential outline of the tests first reported by The Associated Press this week, led analysts to start handicapping which banks could fail. Friday's announcement put some of those fears to rest, underscoring that the Fed will not say any bank lacks the reserves it needs to survive.

The banks will have a few days to review the results and appeal any findings. Regulators will give them final results May 1, according to two people familiar with the matter who spoke on condition of anonymity because they were not authorized to discuss it publicly.

Ford shows it may be able to avoid federal bailout

Better-than-expected earnings from Ford raised hopes Friday that the automaker's restructuring and new products may be enough to spare it from a federal bailout, while General Motors received more government help and Chrysler raced to avoid bankruptcy.

Ford still lost $1.4 billion from January through March, but that was less than expected, and executives said the outlook for future sales was good enough to increase production of its most popular vehicles.

Ford Motor Co. has taken steps over the last few years to avoid government intervention: cutting costs, focusing on its core brands, and introducing new vehicles and advanced features.

"Ford is building the best stuff it's ever made in terms of quality rankings and critical reviews," said Aaron Bragman, an auto analyst at IHS Global Insight. "The vehicles are sufficiently improved and people are starting to realize that."

While Ford tries to go it alone, federal officials are questioning every penny spent by General Motors Corp. and Chrysler LLC, which are both subsisting on government loans.

On Friday, the Treasury Department said it loaned $2 billion to GM, bringing the automaker's total to $15.4 billion. Chrysler has borrowed $4 billion and could get $500 million more so it can keep running while it restructures.

But Ford, under the leadership of former Boeing Corp. CEO Alan Mulally, mortgaged all of the automaker's assets including the trademark blue logo a few years ago, when loans were easier to get from the private sector.

As of March 31, Ford had $21.3 billion in cash to help it survive the worst market for U.S. auto sales in 27 years.

The company said Friday it had spent just $3.7 billion of its cash during the first three months of this year, far less than the $7.2 billion it burned in the fourth quarter of 2008. Investors sent Ford's shares up 11 percent.

"I think the important comparison for us is 'Are we improving versus the fourth quarter?'" said Chief Financial Officer Lewis Booth. "Because the fourth quarter, things were really dreadful.

He said cost cuts and better pricing for its vehicles helped the company narrow its losses from $5.9 billion in the fourth quarter, and he expects continued improvement for the remainder of the year.

Ford said it was able to charge more for its vehicles, which are now coming loaded with features such as electronic blind-spot detection and technology that links drivers' cell phones and MP3 players to a voice-activated command center.

Chrysler, on the other hand, spent more on sales incentives than any other automaker, averaging about $5,000 per vehicle in March, according to Edmunds.com.

With a government-imposed deadline for massive restructuring less than a week away, Chrysler and federal officials held out hope that they could keep the automaker out of bankruptcy court, according to two people briefed on the talks.

Chrysler and the Treasury Department are preparing paperwork for bankruptcy filings one as a reorganization in Chapter 11 with government funding and the other as a liquidation if no government money is available, both people said, speaking on condition of anonymity because the fast-moving negotiations are private.

Chrysler has until Thursday to work out a joint venture with Italian automaker Fiat SpA. GM has until June 1 to make dramatic cuts.

Ford jumped ahead of both competitors in February with a new labor agreement that saved $300 million in the first quarter. A debt-for-equity swap shed $10 billion in debt.

Ford's overall work force in North America shrank 41 percent since December 2006, when it employed 122,400 salaried and hourly workers and began restructuring.

Ford wants to trim its work force even more. Of the 72,300 employees it had in March, 51,000 were union workers who have until May 22 to accept or reject a buyout.

"We started on this transformation of Ford two to three years ago," Mulally said last week in an interview with The Associated Press. "We were very clear with the government that we believed we had sufficient liquidity to make it through this, and we were not asking them for money."

President Obama has dismissed GM and Chrysler's viability plans as overly optimistic, given the current sales climate and the company's sluggish pace of restructuring.

While not discounting Ford's problems, analysts said the company has been more aggressive in key areas where the administration found fault with GM and Chrysler.

For instance, GM was faulted for its unwieldy size, with eight different brands. Ford sold its Aston Martin, Land Rover and Jaguar lines in 2008. It also reduced its stake in Mazda and is currently looking to sell Volvo. That will let Ford focus on Ford, Lincoln and Mercury.

Chrysler was also faulted for focusing on SUVs and minivans, leaving it ill-prepared for high gas prices. Ford is rolling out a mix of fuel-efficient vehicles that have been well-received by consumers who may be concerned about the uncertainty surrounding GM and Chrysler.

Ford's midsize Fusion model is a viable competitor against Toyota Motor Corp.'s popular Camry, with the 2010 models getting praise for quality, safety and fuel economy. More than 40 percent of the 2010 Fusions sold have been hybrids that get 41 mpg on the highway.

Ford is also bringing the Fiesta, its small European car, stateside next summer, and its compact Focus is selling well.

Ford's assembly plants will be churning out more of those products in the second quarter.

One day after GM said it would temporarily close 13 North American plants for up to 11 weeks this summer to slash inventories, Ford said it expects its production to increase 19.5 percent from the first quarter.

"We believe, with the decisive actions we have taken over the last few quarters, we have the dealer stocks well in line," Mulally said. "And with what we see with the reception of the new products, we believe we can go up a little bit more to support the real demand."

Ford said it's on track to break even or turn a profit in 2011. But the company isn't squeaky clean. It still has debt, an underfunded pension plan and a primary market the U.S. where consumers are skittish about buying a new car amid mounting job losses in a recession.

Should GM or Chrysler, or even a key supplier file for bankruptcy, Ford's production is likely to be affected. Mulally said the company has met with the government's auto task force to help it "understand the importance" and "interdependencies" of the supply base.

"The health of the supply base is probably the most critical issue as the government helps GM and Chrysler restructure," he said. "I think they will continue to pay the highest priority as they restructure to the supply base to make sure it stays intact for all of us."

Jump in consumer confidence pulls stocks from lows

After months of giving investors only headaches, consumers gave Wall Street a break Tuesday.

A closely watched measure of consumer confidence soared in April, pulling stocks off an early slide and leaving them with just modest losses as investors grew hopeful that a better outlook among spenders would translate into bigger cash register receipts. The consumer reading balanced worries that large banks might need more capital and concerns about the spread of swine flu.

IBM Corp.'s decision to boost its dividend and spend more to buy back stock gave the market another shot of confidence, but an afternoon rally petered out in the last hour.

The Conference Board said its Consumer Confidence Index surged this month, jumping 12 points to 39.2, its highest level since November. The reading came as a relief to investors as consumers, worried about falling home prices, rising unemployment and a slumping stock market, have been reluctant to spend since last fall.

Todd Leone, managing director of equity trading at Cowen & Co., noted that investors continue to grow more upbeat about prospects for the economy. That optimism followed a string of better-than-expected readings and has driven a market rally since early March.

"People aren't as afraid as they have been. We're definitely seeing more money come back into the market," he said.

But the market's confidence took a hit ahead of the consumer report as investors worried that a growth in swine flu cases could hurt industries such as travel and tourism. The World Health Organization raised its alert to Phase 4 out of 6, saying the flu spreads easily but is not a pandemic.

The Dow Jones industrial average ended the day down 8.05, or 0.1 percent, to 8,016.95 after being down as much as 86 ahead of the consumer confidence report.

Broader stock indicators also lost ground. The Standard & Poor's 500 index fell 2.35, or 0.3 percent, to 855.16, and the Nasdaq composite index fell 5.60, or 0.3 percent, to 1,673.81.

Banking troubles came back into focus after news came out that regulators told Bank of America Corp. and Citigroup Inc. that they may need to raise more capital unless they can convince regulators that results of government "stress tests" were mistaken.

Bank of America fell 77 cents, or 8.6 percent, to $8.15, while Citigroup fell 18 cents, or 5.9 percent, to $2.89.

Some stocks that depend on consumer spending rose on the Conference Board index. The reading was far better than the 29.5 that economists expected, and suggests consumers might be willing to spend more if confidence continues to build.

Starbucks Corp. rose 30 cents, or 2.3 percent, to $13.50, while Coca-Cola Co. advanced 4 cents to $42.28.

"In the short term, this market is going to continue to trade on psychology," said Matt Eads, portfolio manager at Eads & Heald Investment Counsel in Atlanta. "People are looking for anything they can grab on to, which is a sign of good news and economic stabilization."

IBM rose $1.99, or 2 percent, to $101.94 after the company raised its quarterly dividend 5 cents to 55 cents. The company's board authorized another $3 billion for repurchasing stock. The move brings the total available for buying up shares to $6.7 billion.

"IBM's buyback and dividend hike has given the market some confidence and reminded people that there is a little bit of favorable news in technology," said Nick Kalivas, vice president of financial research at the brokerage MF Global in Chicago.

Unlike other major benchmarks, the tech-heavy Nasdaq composite index is up 6.1 percent this year as investors look for lean technology companies to benefit quickly from an economic recovery.

Investors responded more to news about individual stocks rather than buying entire industries, as had been the case in recent months when traders placed bets on consumer staples and technology companies expected to better endure the recession.

In other trading Tuesday, the Russell 2000 index of smaller companies rose 3.28, or 0.7 percent, to 472.81.

The swine flu gave investors reason to cash in recent gains Monday, but the Dow is still up 22.5 percent from the nearly 12-year low it reached in early March.

Bond prices fell, pushing the yield on the 10-year Treasury note up to 3.01 percent from 2.91 percent.

The dollar was mixed against other major currencies. Gold prices fell.

Light, sweet crude fell 22 cents to $49.92 a barrel on the New York Mercantile Exchange.

Advancing stocks narrowly outpaced decliners on the New York Stock Exchange, where consolidated volume came to 5.3 billion shares compared with 5.52 billion traded Monday.

Overseas, Japan's Nikkei stock average fell 2.7 percent. In Europe, Britain's FTSE 100 fell 1.7 percent, Germany's DAX index fell 1.9 percent and France's CAC-40 fell 1.7 percent.

Stocks end higher as Fed sees recession easing

The Fed confirmed what Wall Street has already concluded: The recession is starting to ease.

Federal Reserve policymakers said at the end of a two-day meeting Wednesday that while the economy is still receding, the pace of decline "appears to be somewhat slower" than the last time they met in mid-March.

That was assurance enough for the stock market. Major indexes, which had already been up sharply ahead of the announcement on other signs the economy is stabilizing, posted gains of more than 2 percent. The Dow Jones industrial average jumped 169 points to its highest close since Feb. 9. Bond yields rose as investors sold off government debt, a safe-haven investment.

"You had the Federal Reserve endorsing the basic stance that the economy is beginning to stabilize," said Bruce McCain, chief investment strategist at Key Private Bank in Cleveland.

The Dow is now 25 percent above its early March lows, though stocks have been unsteady over the past several days on fears of a potential swine flu pandemic and persistent concerns about the country's biggest banks.

Stocks began the day higher as investors responded to bright spots within a weaker-than-expected report on the nation's economic output for the first three months of the year.

Gross domestic product contracted at an annual rate of 6.1 percent, much steeper than the 5 percent forecast by economists polled by Thomson Reuters. But the glimmers of good news in the report drove the Standard & Poor's 500 rose to its highest trading level since late January.

Investors were encourage by a rebound in consumer spending, which accounts for more than two-thirds of U.S. economic activity, and a drop in business inventories. On President Barack Obama's 100th day in office, the GDP report at least provided signs that the nation is seeing its economic slide start to moderate.

The Dow jumped 168.78, or 2.1 percent, to 8,185.73. The gain leaves the blue chips down about 591 points, or 6.7 percent for the year.

The Standard & Poor's 500 index gained 18.48, or 2.2 percent, to 873.64, its highest close since Jan. 28.

The Nasdaq composite index advanced 38.13, or 2.3 percent, to 1,711.94. The tech-heavy index posted its highest finish since Nov. 4 and is up 8.6 percent for the year.

Michael Sheldon, chief market strategist at Westport, Conn.-based RDM Financial, said the drop in business stockpiles "should set the stage for a pickup in production, employment and profits."

Investors are still nervous that some banks, notably Citigroup Inc. and Bank of America Corp., might have to get more capital from the government or other investors.

Wednesday's GDP report follows recent data that suggest consumers have taken on a more upbeat outlook on the economy, which can translate into more spending and bigger corporate profits. On Tuesday, a report showing a sharp jump in consumer confidence in April helped pull stocks from an early slide and left the market with just modest losses.

Better-than-expected earnings have been boosting the market as well. Media conglomerate Time Warner Inc. said its first-quarter profit fell 14 percent on deteriorating ad sales, but the results were better than expected. Defense contractor General Dynamics Corp.'s first-quarter earnings rose 3 percent on sales of warships and other military equipment.

Time Warner rose 21 cents, or 1 percent, to $21.98, while General Dynamics rose $2.73, or 5.4 percent, to $53.34.

Investors are still keenly focused on the financial sector, though.

Bank of America held a contentious annual meeting Wednesday. Shareholders ousted Ken Lewis as chairman after shareholders angry about the company's acquisition of Merrill Lynch & Co. voted to separate that job from the one of chief executive. The Charlotte, N.C., bank is one of the biggest recipients of government support.

Meanwhile, Citigroup, which has also received large amounts of federal aid, is trying to figure out how to retain workers. Citigroup CEO Vikram Pandit has talked with Treasury Secretary Timothy Geithner about the possibility of paying special bonuses to keep demoralized workers from getting scooped up by competitors, a person familiar with the matter said. The person, who spoke on condition of anonymity, was not authorized to disclose details about the private talks.

According to a report in The Wall Street Journal late Tuesday, some key employees are threatening to leave the company because of pay restrictions the government placed on the bank.

Bank of America rose 53 cents, or 6.5 percent, to $8.68, while Citigroup rose 23 cents, or 8 percent, to $3.12.

In other trading, the Russell 2000 index of smaller companies rose 18.63, or 3.9 percent, to 491.47.

About five stocks rose for every one that fell on the New York Stock Exchange, where consolidated volume came to 6 billion shares compared with 5.3 billion shares traded Tuesday.

Bond prices fell after the Fed said it saw signs that the economy was finding its footing. That decreased demand for the safety of government debt and pushed the yield on the 10-year Treasury note up to 3.11 percent from 3.01 percent on Tuesday.

The dollar fell against most other major currencies. Gold prices rose.

Light, sweet crude rose $1.05 to settle at $50.97 a barrel on the New York Mercantile Exchange.

Overseas, Britain's FTSE 100 rose 2.3 percent, Germany's DAX index rose 2.1 percent and France's CAC-40 rose 2.2 percent. Japan's Nikkei stock average fell 2.7 percent.