The Dow Jones industrial average rose more than 150 points in the session after US Federal Reserve Chairman Ben Bernanke gave investors more reason to believe further interest rate cuts could be on the way. But the market gave back a big chunk of the gains, a fizzle that was perhaps to be expected after stocks' huge gains Tuesday and Wednesday. Nervousness about tech stocks, the result of weak results from Dell Inc., pulled the tech-dominated Nasdaq composite index down.
In a speech late Thursday, Bernanke said persistently tight credit conditions, the housing slump and high energy prices will probably create some "headwinds for the consumer in the months ahead," and the central bank will have to be "exceptionally alert and flexible." The comments echoed those of Fed Vice Chairman Donald Kohn earlier in the week, which helped Wall Street recover some of its recent steep losses. Investors read Bernanke's words as a sign that the Fed is willing to lower interest rates again after cutting them at the past two meetings.
The Fed meets again Dec. 11, and a rate cut could help reinvigorate the slowing economy. Evidence of a more reticent consumer came Thursday in a Commerce Department report that showed consumer spending rising a modest 0.2 percent in October, the slowest pace in four months.
The risk of rising inflation had been keeping the central bank cautious about loosening its policy. But that risk is looking less threatening now, given that oil prices have dipped below $90 a barrel for the first time since October and that the Commerce Department said core personal consumption expenditures have risen 1.9 percent year-over-year. Core PCE is one of the Fed's preferred inflation measures, and anything between 1 and 2 percent is considered a comfortable rate.
The Dow rose 59.99, or 0.45 percent, to 13,371.72.
Broader stock indicators were mixed. The Standard & Poor's 500 index rose 11.42, or 0.78 percent, to 1,481.14, and the Nasdaq composite index fell 7.17, or 0.27 percent, to 2,660.96.
European stocks rose Friday, after the comments by Bernanke heightened expectations of an interest rate cut next week.
The FTSE 100 Index gained 1.3 percent to 6,432.5, while France's CAC-40 Index firmed 1.3 percent to 5,670.6. Germany's DAX Index rose 1.4 percent to 7,870.5.
Rate cut hopes have been driving markets, and Bernanke further fueled speculation late Thursday that the Fed may still push through another rate cut before the end of the year. The Fed rate decision is due Dec. 11.
Shares in the U.K.'s Vedanta rose 5.1 percent, Anglo American gained 4.2 percent and Antofagasta shares closed 1.1 percent higher.
Norwegian paper producer Norske Skog gained 13.5 percent after the US's AbitibiBowater announced it will cut 600,000 metric tons of newsprint capacity, which will make imports from North America less competitive and could enable Norske to raise newsprint prices.
Most Asian markets rose Friday after investors interpreted the comments by Bernanke to mean he and his central bank colleagues would move to cut a key interest rate next month.
Japan's Nikkei 225 stock index rose to a three-week high, gaining 1.1 percent to 15,680.7 points.
The future course of Japan's market depends heavily on the direction of Wall Street and the outlook for the US, said Yuji Nakagawa, the head of the derivatives dealing division at Toyo Securities. Investors still remain jittery, he said.
Steel and shipping companies were also higher. Nippon Steel Corp. advanced 5.2 percent, and JFE Holdings Inc. soared 5.4 percent. Mitsui O.S.K. Lines Ltd. rose 5.6 percent.
28,643.6. However, the index has recorded gains totaling more than 2,103 points during the past five trading sessions.
Gold retreated from $800 on Friday as oil prices pulled back sharply and the dollar gained a little muscle _ moves that helped calm investor concerns about inflation.
Other energy futures sagged, as did agricultural futures. Silver slipped, while industrial metals made gains.
Gold climbed to the highest level in 27 years earlier this month, driven mainly by oil's ascent toward $100 and steep declines in the US dollar. But with those trends stalling or in reverse, at least temporarily, investors shifted funds out of the safe-haven metal. Investors, meanwhile, warmed up to equities as the Dow Jones industrial average extended its gains into a fourth session.
February gold dropped $13.20 to finish at $789.10 an ounce on the New York Mercantile Exchange.
Silver for March delivery fell 28 cents to $14.165 an ounce on the Nymex.
Oil gave up another $2.30 a barrel, pushing the January contract to a closing price of $88.71 - the lowest level in a month - on expectations that OPEC will raise output when the group meets next week. Crude has fallen more than $10 from its all-time peak of $99.29 a barrel last week.
December gasoline futures fell 0.57 cent to settle at $2.2591 a gallon, and December heating oil futures fell 4.75 cents to settle at $2.5296 a gallon.
The dollar rose against the euro, bucking data that hinted at an economic slowdown, and closing out a week during which Wall Street rose.
The 13-nation euro currency was worth $1.4636 in the late afternoon, down from $1.4753 Thursday. The dollar also climbed against the pound, as the British currency traded at $2.0569 Friday, off from $2.0613.
The Swiss franc and the yen, both popularly used in "carry trades", fell against the dollar as investors' taste for risk returned.
The dollar rose to 1.1311 Swiss francs late Friday from 1.1171 Swiss francs, and surged against the yen to 111.15 Japanese yen from 109.84 yen.
The dollar edged up against the Canadian dollar, buying 99.87 Canadian cents from 99.67 Canadian cents. Earlier Friday, the Canadian currency had dropped below parity with the US dollar to 1.0015 Canadian dollars for every American dollar.
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