* Q1 GDP data shows economy shrank more than expected
* Data suggest inventories will need rebuilding
* Time Warner revenue better than expected
* Indexes up: Dow 2.1 pct, S&P 2.2 pct, Nasdaq 2.4 pct
* For up-to-the-minute market news click []
(Updates to midmorning)
By Leah Schnurr
NEW YORK, April 29 (Reuters) - U.S. stocks extended gains
on Wednesday on better-than-expected earnings and government
data that suggested companies may start to rebuild inventories,
even as the economy shrank more than expected in the first
quarter.
On the earnings front, Time Warner Inc <TWX.N> and Qwest
Communications International Inc <Q.N> provided a lift after
reporting better-than-expected results.
Government data showed gross domestic product dropped more
than expected, but a decline in inventories was good news as it
suggested manufacturers and retailers had reduced the stock of
unsold merchandise, which could be key in pulling the economy
out of recession. [].
"What everybody is hanging their hat on is this inventory
draw, and the expectation that inventories are that far down
that the next thing that's going to happen is that you're going
to have to build inventories and we're going to have start
manufacturing," said Paul Nolte at Hinsdale Associates in
Hinsdale Illinois.
"The expectation is this is the worst and things get better
from here because we will start to rebuild inventories."
Investors are also awaiting comments from the U.S. Federal
Reserve on the state of the economy and are hopeful for signs
the recession is abating.
Analysts said worries about the impact of the spread of
swine flu on the economy were easing, even as a baby in Texas
who died of the new flu strain was the first confirmed death
outside Mexico. A Houston health official said the 23-month-old
was Mexican and was in the United States for medical treatment.
[].
The Dow Jones industrial average <> gained 167.98
points, or 2.10 percent, to 8,184.93. The Standard & Poor's 500
Index <.SPX> climbed 18.59 points, or 2.17 percent, to 873.75.
The Nasdaq Composite Index <> rose 39.47 points, or 2.36
percent, to 1,713.28.
Shares of Time Warner rose 7 percent to $23.30 after the
media group posted flat first-quarter profit, but its revenue
decline was smaller than expected. []
Qwest gained 6 percent to $3.78 after the
telecommunications company posted better-than-expected results
amid cost cutting.
Diversified manufacturer United Technologies Corp <UTX.N>
was the Dow's biggest lift, up 3.3 percent to $49.51.
The Fed will make a statement in the afternoon at the end
of its two-day policy meeting, and economists expect it to hold
its target range for its benchmark funds rate steady at near
zero, as it has since December.
Bank of America Corp <BAC.N> is holding its annual
shareholder meeting in North Carolina on Wednesday amid media
reports it may have to raise more capital.
Shareholders are voting on whether Chief Executive Kenneth
Lewis should stay on the board, and whether he should give up
his job as chairman. Shares of the bank were up 6 percent to
$8.63.
The Wall Street Journal reported Lewis may be forced to
relinquish the chairmanship but is set to win re-election to
the bank's board by a wide margin. [].
(Reporting by Leah Schnurr; additional reporting by Edward
Krudy; editing by Jeffrey Benkoe)
