Stocks closed on a positive note after several wild swings that ended an equally volatile week.
The markets changed direction throughout the day as surprisingly good news on the economy was offset by renewed worries about credit problems at major banks and brokerages.
The Dow was able to recover gains registered early in the session, helped largely by big manufacturers and technology companies.
"People don't like uncertainties in the markets and we have a lot of that right now," said Nadav Baum, managing director of investments for Pittsburgh-based BPU Investment Management. "The flip to that is earnings are still coming out very strong, the world economy's very strong, and people just don't know which way to go."
Friday's back-and-forth continues a volatile week for the markets. Stocks rallied on Wednesday after the Federal Reserve cut interest rates a quarter point, then plunged on Thursday after a confidence-shaking analyst downgrade of Citigroup.
"I think the market rallied on the first Fed cut because they thought that they could see to the back side of the subprime mess." said Jim Fehrenbach, head of Nasdaq trading at Piper Jaffray in Minneapolis. "With the Merrill news and the news on Citi yesterday, people are realizing this is far from over, and there is not going to be a quick fix and there's still more uncertainty than anybody would like."
Shares of Merrill Lynch lost more than 8 percent on concern that the investment bank's results do not fully reflect its exposure to subprime-related losses. Banks and brokerages also tanked on an analyst's report that the financial sector may face $10 billion more in writedowns.
Shares of Goldman Sachs , Citigroup and Bank of America also skidded.
Electronic Arts helped push the Nasdaq higher after the video game publisher reported earnings that beat expectations late on Thursday. Research In Motion rose 3 percent.
Stocks initially rallied after the government reported that nonfarm payrolls jumped 166,000 in October, more than double forecasts. That was on top of Wednesday's report showing the economy grew at a 3.9 percent annual rate in the third quarter, the fastest pace since the beginning of 2006.
Bond rates plunged as uncertainty continued over how much the economy would be hurt by writedowns banks will suffer because of the subprime collapse.
Oil again posted large gains and neared $96 a barrel, while gold also went up and surpassed $800 an ounce.
"Oil is coming back up. The dollar is under renewed attack. These markets have been flashing warning signs and the stock market has been ignoring them," said Peter Cardillo, chief market economist at Avalon Partners in New York. "The market's becoming more aware of it now."
Earnings Wind Down
This summer's financial market turmoil was good news for newly-merged NYSE Euronext , which posted a nearly quadruple third-quarter profit, due to record trading volumes. Net profit rose to $258 million, or 97 cents per diluted share, for the three months ended Sept. 30, up from $68 million in the same quarter of 2006.
Chevron said quarterly earnings tumbled 25 percent, missing analyst estimates on sharply lower profit from gasoline refining. Shares slipped, though others in the energy sector posted gains.
Viacom said its quarterly profit rose 80 percent, boosted by the sale of its music publishing unit, strong ratings at its MTV Networks cable channels and blockbuster turnout for the alien robots movie "Transformers." The company's earnings per share of 65 cents easily beat analyst estimates of 60 cents.
Power company Duke Energy posted lower third-quarter profit Friday, hurt by the spin-off of its natural gas operations, but said it sees 2007 earnings above its previous target. Earnings per share of $1.15 missed estimates of $1.19.
International Paper, one of the world's largest paper and packaging makers, said Friday quarterly net profit slipped as gains from land sales fell sharply from a year ago. Earnings per share of 57 cents matched expectations.
The Volatility Index rose sharply Thursday, above the benchmark of 20 that indicates a volatile market.