The Week on Wall Street: Rates Recede, Stocks Rally

Stocks ended the week in record territory as investors used recent weakness in equities as a buying opportunity.

The Dow Jones Industrial Average closed the week up about 1.6%, the S&P 500 rose 1.7% and the Nasdaq Composite gained 2.1%.

Weekly sector winners were led by energy stocks, which rose more than 4%, as well as the interest-rate sensitive utilities sector. Consumer staples shares and health care stocks lagged the other groups with respective gains of about 0.7%.

Monday

Stocks closed flat after a rally fizzled as interest rate worries popped up again.

"People have begun to realize that the probability of the Fed easing here is very, very low -- maybe even a better probability the Fed tightens here," said Richard Bernstein, chief investment strategist at Merrill Lynch.

Apple announced Monday it launched a version of its Safari web browser with the ability to run on Windows-based computers.

CEO Steve Jobs told an audience at Apple's annual developer's conference that the new Web browser the most powerful and innovative browser in the world. But Apple investors appeared unimpressed as shares fell 3.4%. Soleil-Cross Research said the decline reflected a lack of other new product announcements.

Qwest Communications shares dropped 8% on news the telecom's chairman and chief executive Richard Notebaert will be retiring from the company to spend more time with his family.

Tuesday

On Tuesday, the Dow tumbled 129 points as bond yields moved to multi-year highs.

Texas Instruments lowered the midpoint for its fiscal second-quarter revenue guidance, blaming weak sales of calculators. The stock fell, dragging down semiconductors and other tech shares with it.

Yields on the benchmark 10-year Treasury rose above 5.25% for the first time in five years.

Wednesday

Stocks rallied across the board on Wednesday and the Dow put in its best one-day performance of the year following strong economic data and a decline in bond yields.

"The market has been oversold and people were focusing on rates but then the market started looking a little cheaper and we had buyers come in today," said Todd Leone, head of listed trading at Cowen and Company.

The central bank's latest Beige Book report of anecdotal economic conditions indicated modest or moderate growth with little concerns regarding inflation.

Thursday

Stocks closed higher on Thursday and the Dow saw its biggest two-day gain since August 2006 as interest rates continued to stabilize.

"The technical indicators got to extreme levels to the downside and people are doing a little bargain hunting," said Tom Schrader, head of U.S. listed trading at Stifel Nicolaus.

Investment banks were in the spotlight following earnings reports from Goldman Sachs and Bear Stearns . Goldman reported stronger than-expected results while Bear Stearns disappointed.

Chip stocks saw broad interest with shares of industry bellwether Intel closing at a new 52-week high.

Friday

Stocks rallied for the third straight day and the Dow and S&P came within striking distance of new all-time highs after the May CPI report showed that inflation was being held in check, helping to ease concerns about rates.

Tech stocks were in focus after Adobe Systems reported quarterly results after Thursday's close of trading.  Intel continued it's rally, rising for the sixth day and tacking on another 4.3%, as investors bet on the stock following a Goldman upgrade.

Market breath was positive with advancers outpacing decliners by a 4-to-3 margin, but volume remained relatively low.

Peter Kang is a markets writer for CNBC.com. He can be reached at .

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