NEW YORK - Stocks closed the month by reaching an all-time high, capping a seesaw month that saw financial markets regain momentum only weeks after undergoing a sharp selloff.
The Dow Jones industrial average surged late in the session to close at 17,390, up 195 points, or 1.1 percent. The Standard & Poor's 500 index finished at 2,018, up 23 points, while the Nasdaq composite index rose to its highest level in 14 years.. Both the Dow and the S&P 500 index are back at record highs.
Global markets also roared higher after Japan's central bank committed to a huge increase in its purchases of bonds and other assets, the country's latest effort to shake off two decades of economic stagnation. In the U.S., stocks extended a late-month rally that has been powered by strong corporate earnings.
It's a remarkable feat for the stock market, especially since Wall Street experienced one of its most volatile months since the 2008 financial crisis. It was a month rocked by massive sell-offs but also record highs in a period of just a few days.
The market weakness investors experienced starting in mid-September spilled over into October. Fears that Europe's economy was slipping back into a recession, a plunge in oil prices and some early economic data that showed weakness in the U.S. economy sent investors fleeing the market. Those fears sent stocks, for the most part, straight down for two weeks.
The nadir came Oct. 15, when the S&P 500 nearly went into what's known as a correction, defined as a decline of 10 percent or more in a benchmark index from a recent high.
Many investors have been expecting the stock market to have a correction, a phenomenon that historically occurs every 18 months or so. The last one happened in late 2011.
Shortly after its mid-October swoon, the market bounced back at a dizzying pace. Strong U.S. corporate earnings were the primary driver of the rebound, as well as signs that central banks in Japan and Europe were going to do all they could to stop their economies from dragging everyone else down with them.
The rebound in stocks coincides with a rebound in Americans' optimism about the economy, boosted in part by an uptick in wages. Consumer confidence hit a seven-year high in October, according to a closely watched index from the University of Michigan and Thomson Reuters. The Conference Board earlier this week said that its consumer-outlook index rose in September to highest level since before the financial crisis.
A pick-up in economic growth is also bolstering hopes that the economy is kicking into gear. The U.S. Commerce Department on Thursday reported gross domestic product of 3.5 percent between July and September, topping analyst forecasts. Another test will come next week, when the U.S. Labor Department on Nov. 7 releases its October employment report.
"I don't think it's a surprise that we came close to a correction. We've been expecting one for a while. I think the bigger surprise has been how we rip-roared all the way back up," said Bob Doll, chief equity strategist at Nuveen Asset Management. "When you hit someone over their head with a hammer, you don't expect them to get up immediately."
The Dow and S&P 500 are up 2 percent for the month, while the Nasdaq is up nearly 3 percent.
Friday's gains were drive by the Bank of Japan, which surprised investors by announcing it would increase its bond and asset purchases by 10 trillion yen to 20 trillion yen ($90.7 billion to $181.3 billion) to about 80 trillion yen ($725 billion) annually. The announcement came after economic data showed that Japan's economy remained in the doldrums, with household spending dropping and unemployment ticking up.
Japan's move comes only two days after the U.S. Federal Reserve brought an end to its own bond-buying program. Investors have been hopeful that the European Central Bank might also start buying bonds to stimulate that region's economy by keeping interest rates low and injecting cash into the financial system. That form of stimulus is called quantitative easing, also known among investors as "QE."
"The Japanese central bank has taken the QE baton from the Fed, and equity traders couldn't be happier," said David Madden, market analyst at IG.
Japan's stock market rose 4.8 percent to the highest level since 2007.
The Japanese currency weakened dramatically following the Bank of Japan's announcement. The yen slumped 2.6 percent against the dollar to 112 yen. The yen is trading at the lowest level in more than five years. Japanese companies typically like a weak Japanese yen because it makes their exported goods cheaper abroad.
"The willingness of the Bank of Japan to ease further in the fight against deflation will encourage those who think the ECB should be doing the same," said Julian Jessop, chief global economist at Capital Economics.