NEW YORK (TheStreet) -- Benchmark U.S. stock indices gained ground on Wednesday, taking soft domestic economic data in stride. However, while markets are up, they have yet to fully recover from geopolitical tensions in Iraq and Ukraine which spooked investors a day earlier.
Unusually cold winter weather, expiring unemployment benefits and a reduction in the government's food stamp program hit the economy hard in the first quarter; the final revision to GDP showed a contraction of 2.9%. Economists had expected far less, forecasting GDP to shrink at an annual rate of 1.8%. Durable goods orders for May fell by 1%, below economists' expectations for a flat reading.
The data muddies visibility as to the health of economic growth as the Federal Reserve scales back stimulus. "The implicit assumption at the onset of the tapering process was that the economy would be primed for future rate hikes by the time the Fed had arrested its purchase program and was no longer leaning on the yield curve," Interactive Brokers chief market analyst Andrew Wilkinson wrote in a note.
"However, at the mid-year mark it appears that the economy is likely to be muddling through in the absence of any Fed influence, which is both a dollar and yield negative factor," Wilkinson said.
Markets shrugged off the dip, though. The Dow Jones Industrial Average added 0.29% to 16,867.51, the S&P 500 gained 0.49% to 1,959.52, and the Nasdaq jumped 0.68% to 4,379.76.
A day earlier, indices hit record intraday highs before sinking on new developments in the conflicts in Iraq and Ukraine. European and Asian stocks declined Wednesday, rattled by the same flaring tensions.
In eastern Ukraine, fighting has reportedly spiked even after the call for a cease-fire between the government and pro-Russian rebels. Western powers are now warning Russia of new sanctions if measures to restore calm are not carried out expeditiously.
In western Iraq, at least 57 civilians were killed during airstrikes carried out by Syrian warplanes, as the country ramps up support to Baghdad's Shiite-controlled government to battle Sunni insurgents, according to reports.
Broadcasters were popping on Wednesday after the U.S. Supreme Court ruled Aereo, an Internet streaming service which relays TV content via antennas, had violated copyright law in a 6-3 decision. CBS (CBS) surged 6.2%, NBC-owner Comcast (CMCSA) added 1.1% and ABC-owner Walt Disney (DIS) gained 1.5%.
After the bell, Bed Bath & Beyond (BBBY) is sliding 5.9% to $57.46 after first-quarter earnings of 93 cents a share missed forecasts by 2 cents.
-- By Keris Alison Lahiff and Andrea Tse in New York