Blue-chip stocks staged a stunning reversal Friday after a two-day selloff as bargain hunters snapped up battered financial and technology issues.
The Dow Jones industrial average jumped 37.93 points to end at 4,741.75, bouncing back from combined losses of nearly 80 points on Wednesday and Thursday. The drop stemmed from worries over the rising rate of delinquent consumer loans, a fall in the peso and other nervousness.
For the week, the Dow lost 53.11 points.
In the broader market, advancing issues led decliners 1,128 to 1,067 on moderate volume of 378.8 million shares on the New York Stock Exchange.
The Nasdaq composite index rose 7.98 points to 1,025.55.
"There's bargain hunting in some groups like the banks and some other financial stocks which have gotten crushed," said Guy Truicko, portfolio manager at Unity Management. "Some are down 15% from a week ago."
Analysts said a drop in long-term bond interest rates contributed to the stock market's rally. The benchmark 30-year Treasury yield fell to 6.35% from 6.39% on Thursday.
Stock prices sank and bond rates rose early in the session after the government reported the economy grew at a stronger-than-expected 4.2% rate in the third quarter.
"At the opening, the stock market was discouraged by strong [economic] data which put a chill on those who thought the Fed might lower rates," said Alan Ackerman, a market strategist at Fahnestock & Co. "Nonetheless, upon re-examination . . . there was a sense the numbers were a bit skewed. Buying then came in pretty much across the board."
The 30-share Dow index had fallen as much as 26 points in early trading before the buying began.
The index was on a roller coaster ride all week, slumping 39 points on Monday, rising 28 points on Tuesday, and then dropping almost 29 points on Wednesday and nearly 50 points on Thursday.
More volatility is expected for the near term. "Even though October, a pretty volatile month, will be gone next week, volatility will continue with a lot of sector rotation," Truicko said. "Managers will be shifting money, and money will
come in and out to book profits."
The dollar rose against most major currencies Friday, buoyed by a rebound in the Mexican peso and concerns about the health of Russian President Boris N. Yeltsin.
The peso's rebound--it had fallen more than 6% on Thursday, its steepest one-day drop since the currency collapsed late last year--eased fears of a renewed economic crisis in Mexico. The peso ended up 15 centavos at 7.07 to the dollar.
"Some of the pressure is off the Mexican markets," said Marybeth Slack, currency analyst at MCM CurrencyWatch.
Among market highlights:
* Strong financial stocks included Citicorp, which rose 7/8 to 64 1/8; Chase Manhattan, up 2 1/4 to 58 1/2, and Chemical Bank, up 2 1/4 to 58 3/8.
* Among technology issues, Texas Instruments rose 5/8 to 67 3/8; IBM gained 5/8 to 96 3/8, and Microsoft was up 2 to 100.
* Economically sensitive issues that gained ground after the release of the report on the economy included International Paper, up 1 1/8 to 37 1/8; Alcoa, up 3/4 to 49 1/4, and DuPont, up 7/8 to 62 3/8.
* Sunrise Medical tumbled 8 3/8 to 15 1/8 after the company said it had launched an internal investigation into its financial controls and statements.
* AlliedSignal surged 1 7/8 to 43 5/8. The Morristown, N.J.-based conglomerate said it will fire 3,100 workers in its auto-parts unit and is seeking to sell its automobile anti-lock brakes business.
Also Friday, Lumber prices jumped as fears of a surfeit of Canadian imports waned and domestic wholesalers began rebuilding inventories after having postponed making purchases.
Inventories have been dwindling, but wood wholesalers usually expand supplies toward the end of the year when building plans are made for the spring.
At the Chicago Mercantile Exchange, November lumber jumped the maximum $10 to $249 per 1,000 board feet. In the past week, lumber prices have recovered 25% of the past month's $68 decline from the $300 per contract level on Sept. 18.