For the stock market, happy days are here again. Two of them, anyway.
Stocks soared Friday for the second consecutive day, lifting major indexes to their first weekly gains after six weeks of losses, as investors focused on modestly positive signs for corporate profits and shrugged off the latest lackluster economic news. The Dow industrials jumped 316 points, building on Thursday's 247-point surge.
But skeptics were quick to question whether the two-day burst of buying marked a turning point in the 31-month bear market.
"This is a show-me rally," said Philip Dow, equity strategist at brokerage RBC Dain Rauscher in Minneapolis. "It may not be a two-day wonder, but let's see what happens next week when earnings season starts in earnest and companies offer their outlooks for the fourth quarter and next year."
As buyers embraced stocks Friday, many abandoned government bonds, which have served as a haven for investors spooked by war fears and turmoil on Wall Street. The yield on the benchmark 10-year Treasury note climbed to 3.80 percent from Thursday's close of 3.66 percent, its biggest one-day jump since mid-August.
Stocks lost steam late in the day but were rebounding at the close. The Dow Jones industrial average finished higher by 316.34 points, or 4.2 percent, to close at 7,850.29. The Standard & Poor's 500 index gained 31.40 points, or 3.9 percent, to 835.32, and the technology-heavy Nasdaq composite rose 47.10 points, or 4.1 percent, to 1,210.46.
Volume was heavy, with winners swamping losers by nearly 4-1 on the New York Stock Exchange and by more than 2-1 on Nasdaq.
For the week, the Dow and the S&P 500 both gained 4.3 percent while the Nasdaq composite leaped 6.2 percent.
Investors appeared unfazed Friday by more negative news about retail sales, as well as a report that consumer confidence unexpectedly fell to a nine-month low. They focused instead on a lukewarm earnings report from General Electric and an analyst upgrade of IBM, the latter boosting tech stocks. Perhaps most importantly, six weeks of losses left stocks primed for at least a short-term bounce, analysts said.
"The market was getting dramatically oversold," said Jack Caffrey, equity strategist at J.P. Morgan Private Bank in New York. In Wednesday's trading on the NYSE, 604 stocks reached 52-week lows, he noted, compared with 17 new highs -- a sign that investors were indiscriminately dumping holdings from their portfolios.
Caffrey said investors were braced for Friday's soft economic data, even though the numbers were worse than expected. Retail leader Wal-Mart Stores had signaled that sales were sluggish, and consumer sentiment surveys are often swayed by recent stock market activity, he said.
"Consumers admit to being scared, but they continue to spend," Caffrey said.
So-called short covering added fuel to the two-day rally, analysts said. Short-sellers -- who borrow stock, hoping it will fall so they can buy it back later and pocket the difference -- often scramble during rallies to close out their bets and limit their losses. After the market's summer rally fizzled in late July, many traders sold short.
Friday's earnings reports offered a measure of relief to investors, as GE matched estimates and its stock rose $1.61 to $24.21. But Dow noted that CEO Jeffrey Immelt "wasn't painting rainbows and bluebirds" in the cautious business outlook he offered.
When earnings season heats up next week, with a third of the companies in the S&P 500 reporting their results, analysts say bellwethers such as Microsoft, Intel, Nokia, Motorola and EMC will be closely watched. If chief executives continue to offer glum or murky guidance, investors might unload stocks and quickly snuff the rally in anticipation of dismal profit growth or a return to economic recession, Dow said.
Analysts also noted that the market has staged several big one- and two-day rallies this year, only to fall to new lows. Most recently, after gaining 4 percent on Oct. 1, the S&P 500 fell five of the next six sessions and landed at a new 5 1/2-year low this week.
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