NEW YORK (Reuters) - High-profile investor Bill Gross's departure from Pimco shook the bond market on Friday, while world stock markets and the dollar rose following data showing the U.S. economy grew at its fastest pace in more than two years in the second quarter.
News that Gross, a Pimco co-founder who managed the $222 billion Pimco Total Return Fund, will be joining Janus Capital Group JNS.N pressured short- and intermediate-dated U.S. Treasuries prices as it spurred concerns that Pimco may have to sell Treasuries if investor redemptions increase.
It also drove down shares of German insurer Allianz (ALVG.DE), the parent of Newport Beach, California-based Pimco. Allianz shares tumbled 6.2 percent, wiping roughly 3.75 billion euros ($4.77 billion) from the group's market value. Shares of Janus Capital ended up 43 percent at $15.89, the stock's best one-day advance in its history.
"This news of Gross's departure is gigantic," said Tom di Galoma, head of rates and credit trading at ED&F Man Capital Markets in New York. "People are concerned that Pimco is going to have to liquidate, so there is some pre-selling going on ahead of the fact that they may have to do some selling."
In a bullish signal for the rest of the year, the U.S. Commerce Department reported the U.S. economy grew at its strongest rate in 2-1/2 years during April, May and June.
The Dow Jones industrial average .DJI rose 167.35 points, or 0.99 percent, to 17,113.15, the S&P 500 .SPX gained 16.86 points, or 0.86 percent, to 1,982.85 and the Nasdaq Composite .IXIC added 45.45 points, or 1.02 percent, to 4,512.19.
"The bottom line is that the outlook is still very solid, so it isn't unusual to see (stock) traders come back in," said Michael Mullaney, chief investment officer at Fiduciary Trust Co in Boston.
Among the day's big gainers, shares of Yahoo Inc YHOO.O and AOL Inc AOL.N jumped after Starboard Value LP urged a strategic combination of the companies. Yahoo shares rose 4.4 percent to $40.66, whiles AOL gained 3.7 percent to $44.55.
For the week, all three major indexes fell at least 1 percent. It was the worst week for all three since the week ended Aug 1.
MSCI's global share index .MIWD00000PUS was last up 0.2 percent, turning higher late in the U.S. trading session. European shares .FTEU3 ended up 0.3 percent. The MSCI emerging stocks index .MSCIEF was down 0.1 percent.
The dollar posted an 11th straight week of gains against a basket of major currencies, extending the longest winning streak since its 1971 free float under President Richard Nixon.
The dollar index .DXY added 0.5 percent and hit a four-year peak of 85.655.
The dollar has been driven higher by the divergent monetary policy outlooks between the U.S Federal Reserve's contemplating a rate hike and the ECB and Bank of Japan mulling further stimulus.
U.S. 10-year Treasury notes US10YT=RR were last down 5/32 in price to yield 2.53 percent, from 2.51 percent late Thursday.
Italian and Spanish 10-year bond yields also rose after the news on Gross. Pimco has large investments in euro zone peripheral debt.
Italian 10-year bond yields IT10YT=TWEB rose 4 basis points to 2.40 percent, while equivalent Spanish yields ES10YT=TWEB rose 5 bps to 2.20 percent. Both remained close to their record lows.
In the energy market, U.S. oil prices CLc1 rose following the U.S. GDP data. U.S. November crude CLc1 rose $1.01 to settle at $93.54 a barrel.
Brent crude futures ended flat as improving supply and concerns about tepid demand for oil in Europe and China offset concerns about the Middle East conflicts. Brent for November delivery LCOc1 settled unchanged at $97 a barrel.
Gold fell as a dollar-driven rally dimmed bullion's investment appeal. Spot gold XAU= was down 0.6 percent at $1,214.67 an ounce.
Additional reporting by Sam Forgione and Ryan Vlastelica in New York; Editing by Meredith Mazzilli, Catherine Evans and Dan Grebler