US stocks rally as Libya jitters ease

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The Dow Jones Industrial Average climbed 61.95 points (0.51 per cent) to finish at 12,130.45 and the tech-rich Nasdaq rose 43.15 points (1.58 per cent) to 2,781.05.

The broad-market S&P 500 index advanced 13.78 points (1.06 per cent) to 1,319.88.

"Buyers stepped back in after watching the broader market fall more than two percent during the course of the prior session," Briefing.com analysts said in a client note.

"Although headline risk related to social and political turmoil in the Middle East and North Africa continues, the flow of news out of the region has been less unsettling to investors."

The CBOE Volatility Index, often dubbed the "fear index," dropped nearly 10 per cent from Thursday.

Kimberly DuBord at Briefing.com said the market's perspective had shifted back to the United States after several days of weakness related to the pro-democracy contagion spreading throughout the Arab world.

"Softening oil prices are helping to refocus sentiment toward the ongoing economic recovery, which, coupled with a healthy corporate sector and attractive valuations, continues to underscore investor interest in stocks," DuBord said.

Crude oil prices, which Thursday had soared in intraday trade to nearly $120 a barrel in London and $103 in New York, closed Friday at $112 and $97, respectively.

The equity markets showed "a modest reaction" to a downward revision to US economic growth in the final quarter of 2010, to 2.8 per cent from 3.2 per cent, Charles Schwab analysts said in a client note.

Momentum picked up after a strong report on consumer confidence in February from the University of Michigan, with the highest reading since January 2008.

Boeing provided a shot in the arm to the Dow, gaining 2.18 percent at $72.30. The US Air Force announced after the market close Thursday that Boeing had been awarded a $30 billion contract to build 179 aerial refueling tankers, besting European rival EADS, parent of Airbus.

Shares in American International Group, the government-rescued insurance giant at the epicenter of the 2008 US financial crisis, tumbled 4.67 per cent to $38.54. AIG, 92 percent-owned by the US Treasury, reported Thursday a swing back into profit in 2010 largely due to the sale of key units.

The stock market rebounded after three days of decline as investors worried about escalating Libya political turmoil which has driven oil prices into two-year highs and the blue-chip Dow down 0.31 percent Thursday.

Bonds gained. The yield on the 10-year Treasury bond fell to 3.43 per cent from 3.44 percent late Thursday, while the 30-year bond dropped to 4.52 per cent from 4.54 per cent a day earlier.

Bond prices and yields move in opposite directions.