US economy dodging a bullet?

By Charley Blaine and Elizabeth Strott

Stocks rose today thanks to stronger-than-expected economic data and a sharp decline in the price of crude oil, which fell below $128 a barrel.

Beaten-down financial stocks lifted the market following a report from MasterCard (MA, news, msgs) that showed consumers haven't curbed use of their credit cards.

The Dow Jones Industrial Average gained 52 points to close at 12,646. The Nasdaq Composite Index edged up 22 points to end at 2,508, and the Standard & Poor's 500 Index climbed 7 points to 1,398.

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The Commerce Department today revised its estimate for first-quarter Gross Domestic Product growth to 0.9% -- a significant improvement on the government’s initial estimate of 0.6% GDP growth for the period.

The economy grew at a 0.6% rate in the last quarter of 2007.

Growth in other economies appears to be helping the United States. Exports grew at a 2.8% pace, less than first estimated but still a force for GDP growth, as the falling dollar made U.S. exports less expensive to foreign buyers.

The U.S. economy "still faces a host of problems," Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez, told Bloomberg News. "The only bright spot is exports."

The oil debate continues

A pullback in crude oil buoyed investors today. Light, sweet crude fell $3.69 to $127.34 a barrel on the New York Mercantile Exchange after the Energy Department attributed last week’s unexpected declines in crude and gasoline inventories to delays in unloading tankers.

MasterCard shares rocketed to an all-time high today, gaining $22.11, or 7.7%, to close at $309 after the credit card processor reaffirmed its expectation for double-digit net revenue growth in 2008. MasterCard also said it expects profit and revenues to grow at a double-digit clip over the next few years.

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Banks with large credit-card operations, including Bank of America (BAC, news, msgs) and JPMorgan Chase (JPM, news, msgs), were also beneficiaries of MasterCard's report.

Sears reports a loss

Sears Holdings (SHLD, news, msgs) today reported a loss for its first quarter, surprising Wall Street and sending shares down $3.22, or 3.6%, to $86.14 on the session.

The company said it lost $56 million, or 43 cents per share, down from the profit of $223 million, or $1.45 per share, in the same period last year. Excluding items, Sears lost 53 cents per share, far worse than Wall Street's estimate of profit of 21 cents per share.

CEO W. Bruce Johnson blamed "the difficult economic environment and intense competition."

The company cautioned that the rest of the year would be difficult.

Sears operates Kmart as well as Sears stores. Many retailers have been hit hard by the weakening economy, as consumers have reined in discretionary spending amid record-high commodity and food prices and a slumping housing market.

Sears said sales at stores open at least one year fell 8.6% in the quarter, "most notably within the home appliance, lawn and garden and apparel categories." It also said its board approved the buyback of an additional $500 million in outstanding shares, making the total available for repurchase $643 million.

Costco Wholesale (COST, news, msgs) said its fiscal third-quarter profit rose 32%, better than analysts were expecting, as customers flocked to its warehouse clubs for bargains on food and household items. The stock was up only modestly, however, on concerns that its outlook for the fourth quarter could be overly optimistic.

Bear shareholders approve buyout

Bear Stearns (BSC, news, msgs) formally went out of business today after shareholders agreed to JPMorgan Chase’s buyout of the distressed securities firm for $10 a share, or $2.2 billion. Bear Stearns shares traded above $150 as recently as a year ago.

Some 84% of shareholders voted in favor of the buyout. The deal will close Friday.

"It's a sad day, but we'll get through it, and we may be better off for it," Bear CEO Alan Schwartz said. "That which doesn't kill you makes you stronger. By now we all must be Hercules."

The credit crisis pushed Bear Stearns to the brink of bankruptcy before Treasury Secretary Henry Paulson and other federal regulators intervened in March to broker the sale to the company for an initial price of $2 per share. JPMorgan later sweetened the offer in response to angry Bear shareholders.

''I personally apologize for what has happened,'' former Bear Stearns Chairman Jimmy Cayne said at a meeting that lasted less than 10 minutes. “We ran into a hurricane.''

United, US Airways to meet

Airlines today got a lift from crude-oil’s decline. The sector has been slammed by the soaring price of oil, which has pushed up jet-fuel prices –- up 20% in May alone –- prompting a lot of talk about consolidation among carriers.

The CEOs of US Airways (LCC, news, msgs) and UAL's (UAUA, news, msgs) United Airlines were scheduled to meet today, according to published reports.

The executives were expected to discuss issues that may be hurdles to a merger, including how to finance a deal, who would run a combined company and the big one: labor.

The news comes just a day after reports suggested that talks between the two airlines had ended. Shares of US Airways rose 24 cents, or 5.9%, to close at $4.32; United shares rose 48 cents, or 6.1%, to close at $8.39.

Many airlines have resorted to other means to try to save money. US Airways late Wednesday said it will eliminate free snacks in coach class on all domestic flights beginning June 1. Travelers will still be able to get free sodas, US Airways said.

Last week, American Airlines announced plans to start charging for a first checked bag.

Mark Baumgartner contributed. Charley Blaine is on vacation.