Stocks jumped Friday following a better-than-expected rise in profits at Research in Motion Ltd. and on word that Merrill Lynch may have lined up a big cash infusion from a Singapore fund.
The Dow Jones industrial average capped a volatile week with a gain of more than 200 points and, along with the other major indexes, posted an increase of more than 1.5 percent.
The developments seemed to allay investor fears that economic growth would succumb to tightness in the credit markets. Adding to the measure of relief some investors felt, the Federal Reserve said it would continue with its special biweekly auctions for banks as long as necessary to relieve strains in the short-term debt market.
The announcements came as the New York Stock Exchange set a record for volume in the first half hour and hour of trading during what is known as "quadruple witching." It marks the simultaneous expiration of contracts for stock index futures, stock index options, stock options and single stock futures and often leads to heavy trading near the start and end of the session.
The Dow rose 205.01, or 1.55 percent, to 13,450.65.
Broader stock indicators also showed strong gains. The Standard & Poor's 500 index rose 24.34, or 1.67 percent, to 1,484.46, and the Nasdaq composite index advanced 51.13, or 1.94 percent, to 2,691.99.
Advancing issues outnumbered decliners by about 3 to 1 on the New York Stock Exchange, where volume came to 2.34 billion shares compared with 1.38 billion traded Thursday.
The Dow, which fell more than 1 percent Monday amid concerns about the health of the consumer, gained 0.83 percent for the week. The Standard & Poor's 500 index finished the week up 1.12 percent, and the Nasdaq composite index rose 2.13 percent.
Stocks rose for the second day after Research in Motion said late Thursday that its fiscal third-quarter profit more than doubled on strong demand for its BlackBerry smart phones. The results gave Wall Street hope that the technology sector has room to expand and that consumers and businesses are still spending.
Adding to investors' upbeat mood, The Wall Street Journal reported that Merrill Lynch & Co., facing hefty writedowns due to losing bets on subprime mortgages, is in advanced talks to secure a capital infusion of as much as $5 billion. The money is expected to come from Singapore state-owned investment agency Temasek Holdings Pte. Ltd., a fund that in late July said it would buy a 1.77 percent stake in Barclays PLC for $2 billion.
Sovereign funds have been providing troubled U.S. and European banks with much-needed cash. Over the past month, the Abu Dhabi Investment Authority bought a stake in Citigroup Inc. for $7.5 billion; the Government of Singapore Investment Corp. invested $9.75 billion in UBS AG; and this week China Investment Corp. paid $5 billion for a stake in Morgan Stanley.
Meanwhile, a Commerce Department report on personal spending brought mostly welcome news. Spending rose by 1.1 percent in November, the largest amount in 3 1/2 years, easing concerns that consumers would curtail spending and hurt the economy. However, the Fed's preferred inflation measure — the year-over-year core personal consumption expenditures deflator — rose 2.2 percent. That's above the Fed's comfort level of 1 percent to 2 percent, and could make it harder for the central bank to justify further rate cuts aimed at spurring economic growth.
"I think that investors are impressed with the tenacity of the consumer in the face of the current economic headwinds as well as the self-help actions being taken by some of the distressed financial firms," said Alan Gayle, senior investment strategist at Trusco Capital Management.
He contends the market was poised to move higher after digesting a recent bout of bad news.
"We have been expecting a Santa Claus rally in part because of seasonal factors but also because we feel like the market valuations remain reasonable," Gayle said.
Bond prices fell sharply as stocks jumped. The yield on the 10-year Treasury note, which moves opposite its price, surged to 4.17 percent from 4.06 percent late Thursday. The dollar was mixed against other major currencies, while gold prices fell.
Light, sweet crude rose $2.25 to settle at $93.31 a barrel on the New York Mercantile Exchange.
Wall Street began what some are hoping could be a late-December rally. But with only five trading days left in the year, no doubt some skepticism remains about whether investors can pull off a sustained rally.
Companies like Research in Motion have reported solid sales growth, but others have had a harder time staying profitable as U.S. consumers struggle with sinking home prices and high energy and food costs. Research in Motion jumped $11.64, or 11 percent, to $118.63.
Morgan Stanley rose $3, or 5.8 percent, to $54.37.
Electronics retailer Circuit City Stores Inc. fell $1.91, or 29 percent, to $4.75 after posting a wider-than-expected loss for the most recent quarter due to lower extended warranty sales and restructuring costs.
The Russell 2000 index of smaller companies jumped 18.06, or 2.35 percent, to 785.60.
Overseas, Japan's Nikkei stock average rose 1.50 percent, and Hong Kong's Hang Seng index added 2.26 percent. Britain's FTSE 100 gained 1.39 percent, Germany's DAX index advanced 1.70 percent and France's CAC-40 rose 1.66 percent.