Stocks closed mostly higher on expectations that the Federal Reserve will cut interest rates and the U.S. government will help homeowners recover from the subprime mortgage crisis.
The technology-laced Nasdaq fell after a disappointing outlook from Dell but mortgage lenders, bond insurers and homebuilding stocks that have been battered by the fallout over subprime lending posted double-digit gains.
Investors turned away from the perceived safe-haven of Treasurys, pushing down bond prices, after Federal Reserve Chairman Ben Bernanke bolstered rate cut hopes.
For the week, the Dow climbed 3 percent, the S&P 500 gained 2.8 percent and the Nasdaq gained 2.5 percent.
"It feels like a better week than we've had for a while," said Steve Sachs, director of trading at Rockville, Md.-based Rydex Investments. "It's all rate-cut based. Fundamentals haven't changed -- I see fundamentals weakening rather than strengthening, but in the near term we're going to a little more upside."
But even with the weekly advance, both the Dow and the S&P 500, marked their worst monthly drop in five years. For the month of November, stocks lost ground: The Dow slid 4 percent, the S&P 500 fell 4.4 percent, and the Nasdaq sank 6.9 percent, its worst monthly drop since July 2004, when it slumped 7.8 percent.
Talk the U.S. Treasury Department was finalizing a plan with mortgage industry leaders that would hold interest payments steady for many subprime borrowers facing higher rates
and possible foreclosure buoyed stocks and cut into bonds.
Many teaser rate loans are now entering default, which gave investors who have been spooked by the crisis some relief.