Stocks closed higher for a fourth straight week Friday, extending a September rally with huge daily gains fueled by optimism over the future direction of the economy.
The Dow Jones Industrial Average was up 8.4 percent so far this month, putting the blue-chip index on track for the best September performance since 1939.
On Friday, the Dow rose 197.84 points, or 1.9 percent, to close at 10,860.26. For the week, the Dow was up 2.38 percent.
All 30 Dow components were higher throughout Friday's session, led by Caterpillar , Alcoa,, and General Electric .
Caterpillar had the most impact on the Dow this week, adding more than 50 points to the index; Disney, , meanwhile, dragged the index down 7.5 points.
The upbeat tone to the market came after three lackluster sessionsstalled a rally in the markets that had dominated most of September.
The S&P 500 is up 9.5 percent for the month, also putting the index on track for the best September performance since 1939. On Friday, the S&P 500 rose 23.8 points, or 2.1 percent, to close at 1,148.67. For the week, the index was up 2 percent.
The Nasdaq is up 12.6 percent for the month, on track for the best September performance since 1998. The index rose 54.14 points on Friday, or 2.3 percent, to close at 2,381.22. For the week, the Nasdaq rose 2.8 percent.
The CBOE Volatility Index, widely considered the best gauge of fear in the markets, plunged nearly 9 percent to trade below 22.
The top 10 key S&P sectors were higher for the week, led by consumer discretionary stocks, which gained 2.6 percent. For the month, all 10 key sectors are higher as well, led by technology stocks, up almost 13 percent for the month.
Industrials Alcoa and Caterpillar were among several multinationals getting a boost from the weakening dollar. In addition, Credit Suisse reiterated an "outperform" rating on Caterpillar and raised a price target on the shares to $95 from $85.
The first indication stocks would move higher today came out of Europe, when Germany reported business sentiment rose unexpectedly. That bodes well for U.S. industrial companies, which are among the sectors leading the market's surge Friday, said Quincy Krosby, market strategist at Prudential Financial.
"The market just wants to know that we are not headed for an imminent double-dip recession," Krosby said.
Early in the session, hedge fund manager David Tepper said he was buying stocks, a statement some analysts attributed to a surge in the markets before the opening bell.
Citigroup shares were higher after the bank's board said it would raise CEO's Vikram Pandit's salaryabove the token $1 he has received for the last two years.
Other industrial stocks on the rise included CSXand Norfolk Southern , which advanced almost 3 percent each, even after BB&T Capital lowered its rating on the railroad operators to "hold" from "buy."
Shares of GE and Comcast remained higher after news that Jeff Zucker, CEO of GE's NBC Universal unit, will step down after NBC's merger with Comcast. CNBC.com is a division of NBC Universal.
Shares of Amazon.com jumped after JPMorgan raised its earnings-per-share estimates for the Internet retailing giant for 2010 and 2010, and issued a price target of $198 for the company for the end of 2011, up from $154.
Nike sharessurged after the athletic clothing and shoe maker reported results that beat expectations, citing growing demand in North America, China, and emerging markets. And at least four brokerages raised their price targets on the firm.
Also in earnings news, KB Home shares rose after the homebuilder reported a narrower quarterly loss Friday as closings rose on homes ordered before the expiration of a federal tax credit.
In technology news, Oracle was among a handful of stocks that traded lower after news CEO Larry Ellison sold 1 million shares of the software company's stock and that it is ready to make more acquisitions of data storage companies like NetApp . Rivals Compellent Technologies and Isilon also rose.
Advanced Micro Devices jumped despite joining a list of tech companies warning on revenues this week. AMD said it expects third-quarter sales to fall due to weaker-than-expected demand, especially among consumers buying laptops in Western Europe and North America. In addition, at least three brokerages lowered their price targets on the chipmaker.
And shares of Mahindra Satyam tumbled after the Indian IT firm said it would delist from the NYSE in mid-October due to non-compliance.
Elsewhere, Constellation Energy was slightly higher after Bank of America Merrill Lynch reinstated coverage of the energy company with a "neutral" rating and price target of $35 a share.
Lockheed Martin was higher despite a report by Reuters that the U.K. plans to cut back on aircraft purchases from the manufacturer. Also, Morgan Stanley cut Lockheed to "equalweight" from "overweight."
Bank of America Merrill Lynch hasincreased its share of deals in the mergers and acquisitions sector and it looks well-placed for further growth in Europe and Asia. Meanwhile, global M&A deals have come back this year, rising 21 percent so far, according to ThomsonReuters data.
Volume on the consolidated New York Stock Exchange remained light on Friday, with 4 billion shares trading. On the NYSE floor, 1 billion shares changed hands, with advancers outpacing decliners 5 to 1.
Brazil's state-controlled oil company Petrobrasraised $70 billionin the biggest share offering in history.
Meanwhile, General Motors IPO will be smaller than previously suggested, and the federal government will most likely sell a relatively small portion of its 61 percent stake in the company, according to sources.
Gold hit a new record high near $1,300 an ounce on expectations that quantitative easing by the Federal Reserve could lead to more volatility in the currency markets. Gold rose 1.6 percent for the week to close at $1,296.
U.S. Treasurys, meanwhile, fell, sending the yield on the 10-year Treasury note to 2.61 percent.Inflationary pressures on the horizon are likely to put an end to the bond rally, hedge fund manager Doug Kass said on CNBC. Kass said that shorting bonds will be the "trade of the decade."
In the day's economic news,durable goods for August fell 1.3 percent, from a revised 0.7 increase in July, the Commerce Department reported. Excluding transportation, durable goods rose 2.0 percent, more than expected, after falling 2.8 percent in July.
Sales of new homes were unchanged from a revised boost in July, at a seasonally adjusted annual pace of 288,000, the Commerce Department reported. Sales were down by 29 percent from the same month a year earlier.
On Tap For Next Week:
MONDAY: Chicago Fed national activity index; Texas manufacturing outlook survey, 2-year note auction, Schapiro, Breeden, Pitt on future of SEC; BlackBerry's Devcon 2010, FedEx shareholder meeting
TUESDAY: S&P/Case-Shiller home price index; Richmond Fed survey; consumer confidence index; 5-year note auction; Atlanta Fed Pres Lockhart speaks; Barnes & Noble shareholder meeting; HP analyst meeting
WEDNESDAY: Weekly mortgage applications; oil inventories; Minneapolis Fed Pres Kockerlakota speaks; Philadelphia Fed Pres Plosser speaks; Boston Fed Pres Rosengren speaks; 7-year note auction
THURSDAY: Reading on GDP; Weekly jobless claims; Corporate profits; Chicago PMI; Hearing on J&J recalls
FRIDAY: Personal spending; NY Fed Pres Dudley speaks; Consumer sentiment; ISM manufacturing index; Construction spending; Monthly auto sales; BP's Hayward steps down
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