Stock prices jumped Friday, posting their sharpest gain in three weeks, after the biggest increase in consumer spending in two years helped reduce concern about a possible recession. The Dow Jones industrials rose more than 200 points.
Also boosting the market was a better-than-expected rise in earnings at BlackBerry maker Research in Motion and word that Merrill Lynch might have lined up a big cash infusion.
The developments seemed to allay investor fears that economic growth would succumb to tightness in the credit markets.
"I think that investors are impressed with the tenacity of the consumer in the face of the current economic head winds as well as the self-help actions being taken by some of the distressed financial firms," said Alan Gayle, senior investment strategist at Trusco Capital Management.
Adding to the measure of relief some investors felt, the Federal Reserve said it would continue with its new series of credit auctions for banks as long as necessary to relieve strains in the short-term-debt market.
The Dow climbed 205.01 points, or 1.6%, to 13,450.65.
Broader stock indicators also showed strong gains. The Standard & Poor's 500 index gained 24.34, or 1.7%, to 1,484.46, and the Nasdaq composite index jumped 51.13, or 1.9%, to 2,691.99.
The Russell 2,000 index of smaller-company stocks jumped 18.06, or 2.4%, to 785.60.
Advancing issues outnumbered decliners by about 3 to 1 on the New York Stock Exchange.
Volume was high, setting a record for the first hour of trading, because Friday marked a "quadruple witching," a simultaneous expiration of contracts for stock index futures, stock index options, stock options and single stock futures.
For the week, the Dow gained 0.8%, the S&P 500 rose 1.1% and the Nasdaq advanced 2.1%.
Bond yields surged along with stocks. The yield on the 10-year Treasury note jumped to 4.17% from 4.05% late Thursday. The dollar was mixed against other major currencies, while gold prices rose.
Stocks got a lift after the Commerce Department reported that personal spending rose 1.1% in November, the biggest increase since early 2004, easing concerns that consumers would curtail spending.
"The consumer's resiliency is just amazing," said Bill Knapp, chief investment strategist at MainStay Investments in New York, predicting that a recession would be avoided.
Energy shares climbed 2.4% after the spending report suggested economic growth could spur demand for fuel. Crude futures rose $2.25 to $93.31 a barrel in New York.
Oil-field services provider Schlumberger added $3.86, or 4.3%, to $94.64. Hess, the fifth-largest U.S. oil company, surged $8.69, or 9.7%, to $98.
Adding to the upbeat mood, the Wall Street Journal reported that Merrill Lynch, facing hefty write-downs on mortgage-related securities, was in advanced talks to secure a capital infusion of as much as $5 billion from Singapore state-owned investment fund Temasek Holdings.
Merrill Lynch climbed $1.04, or 1.9%, to $55.54. Morgan Stanley rose $3, or 5.8%, to $54.37.
Research in Motion jumped $11.64, or 11%, to $118.63 after reporting that its fiscal third-quarter profit more than doubled on strong demand for BlackBerry smart phones. The results offer hope that the technology sector has room to expand.
* Electronics retailer Circuit City Stores plunged $1.91, or 29%, to $4.75 after posting a wider-than-expected loss for its latest quarter because of restructuring costs and lower sales of extended warranties.
* Washington Mutual slid 57 cents, or 3.9%, to $14.10, an 11-year low. U.S. regulators are said to be investigating loans that New York prosecutors claim were based on inflated home appraisals.
* Stocks also rallied overseas. Key indexes climbed 1.5% in Japan, 2.3% in Hong Kong, 1.4% in Britain and 1.7% in France and Germany.