Dow Rises 117, Ends the Week Up 517 After Fed’s Rate Cut

Stocks continued to rise on Friday, ending one of the best market weeks ever, as the Federal Reserve Board’s surprise interest rate cut on Thursday stoked optimism about an end to global financial turmoil.

The Dow Jones industrial average gained 117.40 points, or 1.4%, to 8,416.76, closing near the high for the day.

For the week the Dow soared 517.24 points, or 6.6%, as buyers rushed back into the market.

Broader market indexes also advanced Friday. The Nasdaq composite rose 0.6% to 1,620.95, lifting its gain for the week to 8.6%. The Russell 2,000 index of smaller stocks jumped 2.4% on Friday and gained 7.7% for the week.

New York Stock Exchange volume soared to 1 billion shares on Friday, among the busiest days ever. Winners topped losers by 2 to 1.

“The bull market hasn’t been revived, but we’re seeing a serious effort to get it started,� said Jeffrey Davis, chief investment strategist at State Street Global Advisors. “We’re going to see more rate cuts, and that’s going to decrease the chance of recession.�

The Fed, which cut its benchmark short-term interest rate from 5.5% to 5.25% on Sept. 29 amid deepening worries over financial disasters overseas and on Wall Street, reduced the rate again, to 5%, on Thursday afternoon. The move seemed to underscore the Fed’s intent to restore confidence in the U.S. and global financial systems by making money more available.

“The Fed is speeding up easing, and there is more to come,� said Kevin McClintock, taxable bond chief at Dreyfus Corp.

Treasury security yields, however, were mixed on Friday after plunging on Thursday. The 1-year T-note yield ended at 3.88%, down from 3.91% Thursday. And the three-month T-bill tumbled to 3.64% from 3.94%.

But the 30-year T-bond yield edged up slightly, to 4.98% from 4.97%.

More important, traders said yields slipped on some corporate bonds, suggesting that investors may be becoming less reluctant to buy higher-risk securities. Their reluctance that has paralyzed credit markets in recent weeks.

“We have seen the worst for corporate [yields],� said Alan Koepplin, who manages about $2 billion in fixed income securities at SG Cowen Asset Management.

Other analysts said it’s too early to tell whether the Fed’s credit-easing moves will be enough to end the financial trauma that has rocked world markets.

From stocks investors’ point of view, however, “if we avoid the recession that everybody has put into their forecasts, then we should really be OK in the near term,� said William Gerlach, who helps manage $2.5 billion in small- and mid-capitalization stocks for Miller Anderson & Sherrerd.

In foreign trading Friday, Asian markets zoomed, with Hong Kong rising 9% for the day and 15% for the week. European markets posted gains of 1% to 2%. But Latin American markets were mostly flat after surging on Thursday.

The week’s gains in U.S. stocks left the Dow down 9.9% from its 1998 record high. At its low point in August the index was off about 20%. Smaller-stock indexes still are off 20% to 30% from their peaks.

Among Friday’s highlights:

* Bank stocks were strong for a second day. Bank One rose $2.44 to $47.63, U.S. Bancorp gained $1.38 to $40.94 and First Union shot up $3.13 to $57.38. But Bankers Trust lost $5.50 to $51.38 on rumors of financial trouble.

* Airlines, whose fortunes are closely tied to economic swings, zoomed again. Delta rose $4.50 to $98 and US Airways gained $4.50 to $54.63.

* Many industrial stocks also were big winners, with DuPont up $3.63 to $64.13 and Cummins Engine up $2 to $34.50.

* In the telecom sector, Tellabs jumped $6.19 to $44.94 after saying it will likely beat analysts’ earnings estimates in the current quarter. But major tech stocks were mixed. Intel lost 81 cents to $83.75 and Dell was off $1.38 to $56.69, though Sun Microsystems gained $1.44 to $50.25.

Market Roundup, C4