NEW YORK – Stocks skyrocketed Friday, with the Dow Jones industrial average recording its strongest gain since last September, as investors, emboldened by the absence of any major terror incidents over the Fourth of July holiday, extended Wednesday's bargain-hunting spree.
The blue-chip Dow index jumped 324.53 points, or 3.58 percent, to 9,379.50, ending a six-week losing streak. The Dow's surge set off trading curbs in index-arbitrage trades and was the gauge's biggest percentage gain since Sept. 24 when it rose 4.5 percent after a week of panic selling following the Sept. 11 attacks.
The tech-laced Nasdaq Composite Index surged 68.21 points, or 4.94 percent, to 1,448.38. The broad Standard & Poor's 500 surged 35.04 points, 3.67 percent, to 989.03. It was the biggest one day gain for Nasdaq and S&P since May 8 when the indexes gained 7.8 percent and 3.75 percent, respectively.
Investors shrugged off data showing the unemployment rate edging higher in June amid weaker-than-expected payrolls growth. Two days of solid gains in European markets also rubbed off on Wall Street, which had a shortened session on Friday with the market closing at 1 p.m. EDT.
"Given the extent of the warnings (of attacks) out there, we came through July 4 safely, but the weekend is not over yet," said Barry Hyman, chief investment strategist at Ehrenkrantz King Nussbaum. "We have some panic short covering."
Hyman was referring to activity by investors who had bet share prices would fall. These short-sellers borrow shares and sell them in the hope of buying them back later at a lower price. When stocks move higher instead, the shorts buy back to "cover" those positions to book gains or guard against losses, and the new demand sends stocks even higher.
Few money managers called the light-volume rally a decisive turning point in a market that had sunk to multiyear lows recently as investors fretted over the state of Corporate America's soggy profits, accounting scandals and fears of terror attacks.
"I am doing the barbecuing right now. My portfolio is heating up, and I am happy. But if there is any fundamental news out there I missed it," said Henry Herrmann, chief investment officer at Kansas-based Waddell & Reed, which manages $32 billion. "The employment data was not encouraging. It shows the labor market is soft. That was the only hard data out there."
Leading the advance were Big Techs like chip giant Intel Corp. (INTC) , up $1.79, or 10 percent, at $19.54. Applied Materials (AMAT), the top maker of gear used to build semiconductors, gained $1.94, or 10.6 percent, at $19.93. Among Dow stocks, computing giant International Business Machines (IBM) soared $2.99 at $73.50, or more than 4 percent.
The tech sector drew fuel from upbeat comments by Wall Street house Goldman Sachs on Asian technology firms. Glimpsing a pickup in global personal computer demand, Goldman upgraded its stance on Asian technology shares to "overweight" from "neutral" and said Asian tech shares could potentially rise 25 to 50 percent over the next three to six months.
Goldman said its preferred near-term bets are makers of DRAM (dynamic random access memory) chips, with its top pick global leader Samsung Electronics of South Korea. Reflecting the gains in U.S. semiconductor stocks, the Philadelphia semiconductor index soared 9 percent.
Wall Street was unfazed by an incident in which an Egyptian man opened fire at an El AL ticket desk at Los Angeles airport Thursday, killing two people before being shot dead by guards.
"My sense is that we dodged a small bullet," said Michael Kayes, chief investment officer of Eastover Capital Management. "Everyone was on edge and you hate to see anything like that, but I think we are over it."
The U.S. stock markets were shut on Thursday for the Independence Day holiday. On Wednesday, stocks recovered to finish higher as investors did some last-minute buying of battered technology stocks, snapping a losing streak that had pushed stocks to multiyear lows.
"What we saw last week was some sector capitulation, not market capitulation; it's a bit irrational," said Hyman. "And with no new (corporate) fraud allegations out there, it looks like a decent technical rally going on."
Software companies webMethods (WEBM) and JDA Software (JDAS) warned investors that their financial results will suffer as customers delay signing deals at the end of the second quarter. JDA shares sank $11.91 to $15.09 but shares of webMethods -- which had fallen earlier in the week in expectation of the warning -- rose 21.90 cents to $8.35.
Great Atlantic & Pacific Tea Co. (GAP) rose after the grocery chain, better known as A&P, restated results for three years, including turning a loss into a profit for one year, after an accounting review uncovered that manufacturer discounts and promotions were improperly booked. Shares were up $1.65 at $18.05, or 10 percent.
More than 25 issues rose for every six that fell on the New York Stock Exchange and 23 stocks advanced for every 8 decliners on the Nasdaq.
Trade volumes were thin with many traders away from their desks, extending the holiday into the weekend. The session was three hours shorter than usual, and saw 710 million shares traded on the New York Stock Exchange and little more than 1.1 billion shares traded on Nasdaq, well below the daily average.
The Russell 2000 index, which tracks smaller company stocks, rose 11.45, or 2.67 percent, to 440.92. It was down 21.73, or 4.7 percent, for the week.
Overseas, Japan's Nikkei stock closed 1.82 percent higher. In Europe, Germany's DAX index was up 5.27 percent, France's CAC-40 rose 4.49 percent, and Britain's FTSE 100 was up 3.23 percent.
Reuters and the Associated Press contributed to this report.