Stocks surge as oil tumbles more than $6

NEW YORK -- Stocks capped a volatile week with sharp gains Friday as oil prices tumbled and after Federal Reserve Chairman Ben Bernanke said inflation pressures are likely to moderate. The Dow Jones industrial average rose nearly 200 points.

Investors also appeared cheered by an inflation forecast from Bernanke who said at the Kansas City Fed's annual economic symposium that inflation pressures should moderate this year amid tepid economic growth. But he also added that the inflation forecast remains "highly uncertain."

John Massey, senior portfolio manager at AIG SunAmerica Asset Management, said investors are encouraged by Bernanke's comments on interest rates and by the possibility of a buyer for Lehman.

"We're seeing the potential for maybe another white knight," he said, referring to prospects of a deal to acquire all or part of the investment bank.

The health of the financial sector and rising inflation are two of the market's greatest concerns. Although Bernanke refrained from making predictions about inflation, the market was mollified when light, sweet crude plunged $6.59 to settle at $114.59 a barrel on the New York Mercantile Exchange, after surging by more than $5 a barrel on Thursday.

The Dow rose 197.85, or 1.73%, to 11,628.06, near its highs of the session.

Broader stock indicators also rose. The Standard & Poor's 500 index rose 14.48, or 1.13%, to 1,292.20, and the Nasdaq composite index rose 34.33, or 1.44%, to 2,414.71.

The run-up Friday left stocks with mostly modest losses for the week that again saw a series of triple-digit moves in the Dow. The Dow was down 0.27%, the S&P 500 was off 0.46% and the technology-heavy Nasdaq was down 1.54%.