NEW YORK (AFP) — Wall Street ended the week on an up note Friday as cooling oil prices diminished fears that the economy could be further singed by inflationary pressures and after the Federal Reserve kept interest rates on hold.
Market action remained volatile through the week, as stocks dived and rallied on alternate days, but finished out the week notably above closing values a week ago.
Investors appeared to largely take in their stride the vast losses announced by mortgage finance giants Freddie Mac and Fannie Mae and announcements by major banks that they would be buying back billions of dollars of tainted securities affected by the credit crunch.
Wall Street booked gains early in the week Tuesday as the Fed opted to keep its main interest rate pegged at 2.0 percent as policymakers adopted a wait-and-see approach to lackluster economic growth.
The Dow Jones Industrial Average of 30 blue-chip shares rose 3.60 percent in the week to Friday, to end at 11,734.32, while the broad-market Standard & Poor's 500 index gained 2.85 percent to 1,296.32.
The technology-laden Nasdaq composite surged 4.46 percent for the week to 2,414.10 as investors prepared for fresh economic reports in the coming week.
"Volatility remained high in both the US equity and fixed income markets last week," economists at Global Insight said in a briefing note.
"However, a less hawkish statement on policy from the FOMC (Federal Open Market Committee) on August 5, combined with sharply declining energy prices, provided a powerful lift for Dow Jones industrials last week, despite generally weak economic reports," the economists added.
Traders said the markets would be keeping a close eye on oil prices in the coming week and that a government survey on retail sales during July, due for release Wednesday, would also be on Wall Street's radar.
A benchmark New York oil futures contract closed down a hefty 4.82 dollars Friday at 115.20 dollars a barrel from a day earlier, and some observers feel prices peaked last month.
"Discounting tail risk, we think oil prices have peaked," Lehman Brothers analysts said in a briefing note.
"Barring a physical disruption that may temporarily spike prices, we judge that oil prices have peaked for the next few years," the analysts said.
Crude prices have slumped from record peaks over 147 dollars last month.
Most economists meanwhile predict that July retail sales rose 0.5 percent, which would mark an acceleration from the mild 0.1 percent gain in sales recorded in the prior month.
The indicator is followed closely because of its close relation to consumer spending which accounts for the lion's share of economic growth in the world's biggest economy.
Other reports to be released in the coming week will include snapshots on export and import prices, jobless claims and industrial production.
While the economy is still being buffeted by a housing slump, a credit crunch and still relatively high oil prices, analysts are trying to predict the path of growth in future months.
Some fear the economy could be on the brink of a recession, but others believe it will dodge an economic contraction.
Major banks are also likely to remain in the spotlight in the coming week, especially after the settlements reached by a group of banks in recent days.
Swiss banking giant UBS joined Citigroup and other major banks Friday as US regulators announced it had agreed to buy back 19.4 billion dollars' worth of stressed securities.
Citigroup and Morgan Stanley signed up to similar deals with federal and state regulators on Thursday under which they also agreed to buy back tainted securities marketed to investors and corporate clients.
Bond prices ended the week mixed as the yield on the 10-year Treasury bond rose slightly to 3.950 percent from 3.948 percent a week earlier, while that on the 30-year bond dropped to 4.555 percent from 4.569 percent.
Bond yields and prices move in opposite directions.
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