Pre-Holiday Stock Rally Ends Turbulent Week

Stocks finished a turbulent week with solid gains Friday as new data showing slower-than-expected economic growth helped calm fears about rising inflation and higher interest rates.

Investors also jumped at the chance to pick up shares at cheaper prices as a result of Wall Street’s slump this week.

After tumbling 235 points Thursday, the Dow Jones industrial average bounced back 92.81 points, or 0.9%, to close at 10,559.74.

“We still are in a tug of war between those people who think interest rates will go higher and those that don’t,” said Alan Ackerman, senior vice president at Fahnestock & Co.

Broader indexes also rose. The Standard & Poor’s 500 gained 20.43 points to close at 1,301.84, while the technology-heavy Nasdaq composite index surged 51.37 points, or 2%, to 2,470.52. The Russell 2,000 index of smaller companies gained 5.76 points to close at 438.68.

With Friday’s gains, the Dow ended the week down 269.54 points, or 2.5%. The index lost 2.1% in May, its steepest monthly decline this year. But it is up 15% for the year.

Trading was light Friday as market pros eased into the three-day holiday weekend.

The quiet volume and broad-based gains provided an antidote to the week’s gyrations amid fears that signs of rising inflation will prompt the Federal Reserve to raise interest rates.

Some of the inflation fears were tempered after the Purchasing Management Assn. of Chicago reported a greater-than-expected drop in its business activity index. That helped boost bank and financial services shares, which have been hurt by fears of an interest rate hike. Citigroup rose $2.81 to $66.25 and American Express gained $4.19 to $121.06.

Bargain hunters helped lift tech stocks. Microsoft gained $2.31 to $80.69 and Amazon.com rose $4.19 to $118.75.

“The tech stocks and Internet stocks look like they’ve reached some sort of bottom,” said Barry Hyman, senior equity analyst at Ehrenkrantz King Nussbaum.

Advancing issues outnumbered decliners 2 to 1 on the New York Stock Exchange.

Bond yields were little changed, while in currency trading, the euro dipped to a new low against the dollar but recovered slightly at the end of the day.

Among the highlights:

* Yahoo climbed $14.63 to $148 as the Net search service completed its GeoCities acquisition. Yahoo said it fired about 200 GeoCities employees and will take a $68-million pretax charge for the $3.7-billion acquisition.

* @Home rose $4.81 to $126.75 after completing its acquisition of Web directory Excite and changed its name to Excite @Home. Excite rose $7 to $133.

* Wet Seal fell $2 to $27.75 as the clothing retailer’s shareholders, including executives and directors, filed to sell 1.65 million shares.

Overseas, Japan’s Nikkei index fell 1.3%. European markets were mixed.

Market Roundup, C4