NEW YORK, Oct. 31 -- U.S. stocks rallied Friday afternoon, capping a month otherwise defined by giant swings, unprecedented volatility and a search for signs that a bottom in the market has been reached.
In light trading Friday, the Dow Jones industrial average surged at the end of a volatile day of trading. The Dow, which had been up more than 200 points at times during the day, closed up 1.6 percent, or 144 points, at 9325. Although it was a good week for the Dow, the index was down about 14 percent for the month, which ranks among the worst on record for the markets.
The broader Standard & Poor's 500-stock index gained 1.5 percent, or 15 points, to end the month at 969. It was a 16 percent monthly loss. The tech-heavy Nasdaq rose 1.3 percent, or 22 points, to 1,721. That was a monthly drop of nearly 17 percent.
This week's more than 11 percent jump on the S&P 500 is the largest weekly gain since October 1974, according to Bloomberg News, a rally largely in reaction to the Federal Reserve's interest rate cut. "The aggressive buying is in response to the aggressive selling," said Carter Braxton Worth, chief market technician at Oppenheimer Asset Management. "Just like people panic on the way out, they panic on the way in."
The markets Friday reversed early morning losses after absorbing several bits of economic data released in the morning.
The Commerce Department reported that personal spending in September fell 0.3 percent from the previous month. The seasonally adjusted decline was slightly sharper than economists had forecast and the most pronounced in more than four years. The drop came as personal incomes rose a better-than-expected 0.2 percent, signaling that Americans are making calculated decisions to pull back their spending.
Meanwhile, the Reuters-University of Michigan survey of consumer sentiment showed the biggest decline since record-keeping of monthly confidence levels began in 1978. A major gauge of business activity also showed a record monthly drop, as a closely watched index from the Institute for Supply Management-Chicago contracted to its lowest level since the 2001 recession.
But investors may have been heartened by a decline in bank lending rates that some economists have used to measure the availability of credit. The cost of borrowing dollars for three months in London, or three-month Libor, fell from more than 3.19 percent to less than 3.03 percent.
Crude oil prices reached $65 a barrel, down from the peak of $147 in July. Gas prices have fallen to $2.50 a gallon, down from $4.11 in July, said John Townsend, spokesman for AAA Mid-Atlantic. Since July, Townsend said, consumers have been saving $400 million a day in fuel costs.
"People are moving [away] from a fear standpoint where they question the stability of the economy and markets," said Matt McCormick, portfolio manager and banking analyst at Bahl & Gaynor Investment Counsel in Cincinnati. "Now we're dealing with the realization . . . that it's not the worst-case scenario people thought it was a few weeks ago."
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