The Dow Jones Industrial Average advanced 167.61 points, or 2.2 percent, to 7,899.52. Battered financial and technology stocks led the rally.On Thursday, the index came back from a 274.20-point loss to close 9.78 points lower.
"There's a good chance that Thursday's action might have been the low for the market," said Courtney Smith, chief investment officer at Orbitex Management Inc.
"We've suffered the bulk of the shock waves that we're going to have to suffer," said Paul Rabbitt, president of Rabbitt Analytics. "The prevailing negative here is the impeachment process, which will dampen people's enthusiasm for just about anything."
On the week, the Dow added 114.83 points, or 1.5 percent.
On the year, the Dow is down 8.73 points, or 0.1 percent, following gains of 33 percent, 26 percent, and 22 percent, in 1995, 1996, and 1997, respectively.
Next week, reports on retail sales, industrial production, and wholesale and retail price inflation are on the economic calendar.
The chief focus, however, will be on the unofficial launch of corporate America's third-quarter earnings reporting season. In particular, investors will watch to see what corporate officials have to say about the outlook for the fourth quarter and 1999.
On Friday, speculation ran rampant that the Federal Reserve will engage in another cut of short-term interest rates before its next policy meeting Nov. 17.
The central bank lowered the federal funds rate target for the first time in nearly three years on Sept. 29. The funds rate is the rate banks charge each other for overnight loans.
"We have to deal with the Oct. 31, 1988, closing fiscal year for tax selling purposes for mutual funds," Rabbitt said. "Most funds have taken a tremendous amount of short-term capital gains in the roaring bull market of the first quarter of 1998. It would not be very wise for them, given that heir net asset values are down substantially, to deliver capital gains tax ramifications.
"So there's a very strong motivation for funds to match up their first-quarter gains with losses this month," he said. "That puts pressure on the market for the next couple of weeks. I'm hoping that that will be enough and we won't suffer any further fundamental shockwaves. And if that's the case, I think the low on the market is probably Dow 7,100."
In the currency market, the U.S. dollar, after being subjected to its worst loss in 25 years Wednesday, headed lower.
In the bond market, massive hedge fund liquidation slammed prices for major setbacks. The 30-year Treasury declined 1 29/32, to yield 5.125 percent.
The stronger yen helped Asian markets. Hong Kong's Hang Seng stock index surged 7.2 percent, South Korea's Seoul Composite stock index soared 7.5 percent, and Indonesia's Jakarta Composite stock index jumped 5.7 percent.
In Friday's market indicators:
- The Standard & Poor's 500 Index rose 2.6 percent.
- New York Stock Exchange winners bested losers by 19 to 12.
- On the Big Board floor, turnover shrank 21 percent to 882 million shares.
- The Nasdaq Composite advanced 5.2 percent. Advancing issues led decliners by better than 5 to 3 in the Nasdaq Stock Market. Volume totaled 886 million shares.
- The Russell 2000 Index of small-capitalization stocks gained 2.6 percent.
Among the stocks in the news Friday:
- Healthcare products and services provider Allegiance (AEH) sprinted 9 7/16, or 41 percent, to 32 7/16. Drug and hospital supplies distributor Cardinal Health (CAH) will purchase Allegiance for $5.4 billion in stock. Cardinal shares slumped 8 11/16 to 84.
- Fannie Mae (FNM) lost 11/16 to 58 5/16 despite beating Wall Street's estimate by a penny with its third-quarter operating profit of 82 cents a share. It earned 72 cents in the year-ago period. The company is the largest U.S. investor in home mortgage loans.
- Industrial and commercial supplies retailer Fastenal (FAST) gained 3 1/8 to 25. It reported third-quarter net of 37 cents a share, a cent less than Street expectations, but 7 cents above the year-ago figure. The company noted a trend of slowing sales due to ebbing industrial activity in North America.
- Merrill Lynch (MER) added 3 to 45 1/2. Talk circulated that investor Warren Buffett has been buying shares of the broker. On Thursday, the stock gained 5 in an otherwise anemic market. It stood about 60 percent off its July 13 peak of 109 1/8. Some see the stock as a bellwether for the overall market. The company, along with other brokerage firms, is expected to announce job cuts when it reports earnings next week.
- Amgen (AMGN) picked up 1 15/16 to 71. Merrill Lynch upped its view of the biotechnology interest to "accumulate"" from "neutral" on both a near- and long-term basis.
- Scitex (SCIXF) drooped 3 7/16 to 3/16 after the Israeli concern said it sees a third-quarter loss of between 32 cents and 38 cents a share. Wall Street had projected a profit of 16 cents for the maker of digital graphics communications products. Scitex tied the bleak assessment to disappointing results at its digital printing division and postponements of some key orders. It also mentioned the weak economies of Asia and Latin America as having impacted its operations.
- German software concern SAP (SAP) rallied 4 1/16 to 36 after indicating its sales shot up 43 percent in the third quarter.
- Dollar General (DG) depreciated 3 9/16 to 22 7/16. BT Alex Brown cut its opinion to "buy" from "strong buy." The broker said "tough sales comparisons" are in the discount retailer's future.