Stocks jumped Friday following a better-than-expected rise in profit at Research in Motion rim and on word that Merrill Lynch mer might have lined up a big cash infusion from a Singapore fund.
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 after the opening bell that it would continue with its special biweekly auctions for banks as long as was 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 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 trading.
The Dow Jones industrial average was up 205.01, or 1.6%, to end at 13,450.65. The Standard & Poor's 500 index was up 24.34, or 1.7%, to finish at 1484.46. The Nasdaq composite index was up 51.13, or 1.9%, to close at 2691.99.
Advancing issues outnumbered decliners by about 3 to 1 on the New York Stock Exchange, where volume came to 2.32 billion shares compared with 1.38 billion traded Thursday.
For the week, the Dow rose 0.9%, the S&P 500 gained 1.2% and the Nasdaq jumped 2.1%.
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, facing hefty write-downs due to losing bets on subprime mortgages, may get a capital infusion of as much as $5 billion. The money is expected to come from Singapore state-owned investment agency Temasek Holdings Pte, a fund that in late July said it would buy a 1.77% stake in Barclays 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 for $7.5 billion; the Government of Singapore Investment Corp. invested $9.75 billion in UBS; and this week China Investment Corp. paid $5 billion for a stake in Morgan Stanley.
"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 following the Fed's announcement it would continue its special auctions. The yield on the 10-year Treasury note, which moves opposite its price, surged to 4.17% from 4.06% 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 six 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 $11.78, or 11%, to $118.78.
A Commerce Department report on personal spending brought investors mixed news. Spending rose 1.1% in November, the largest amount in 3 1/2 years. But the Fed's preferred inflation measure — the year-over-year core personal consumption expenditures deflator — rose 2.2%. That's above the Fed's comfort level of 1% to 2%, and could make it harder for the central bank to justify further rate cuts aimed at spurring economic growth.
Electronics retailer Circuit City Stores cc fell $1.91, or 29%, 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 18.04, or 2.4%, to 785.58.
Overseas, Japan's Nikkei stock average rose 1.5%, and Hong Kong's Hang Seng index added 2.3%. Britain's FTSE 100 gained 1.4%, Germany's DAX index advanced 1.7% and France's CAC-40 rose 1.7%.