Stocks rose on Friday on news that the European Central Bank is considering setting yield band targets in a new bond buying program that could help contain borrowing costs for Greece and Spain.
Major stock indexes, which were lower to flat earlier in the session, posted sharp gains following the news, but the S&P 500 was still on track to end the week about 0.7 percent down.
Setting yield band targets would allow the ECB to keep its strategy shielded and avoid speculators trying to cash in, central bank sources told Reuters on Friday. Setting a band is an option gaining in favor among central bankers, but the decision would not be made before the ECB's September 6 policy meeting, the sources said.
"Anytime we get comments out of Europe that create a perception that they are working diligently to solve the debt issue, the euro starts to rally, the dollar goes lower and in return, our equity markets move higher," said Randy Frederick, managing director of active trading at Charles Schwab.
"I'm not sure if this will have lasting impact on the market but one thing for sure is that the market was sort of in this consolidation mode before this news came out."
The Dow Jones industrial average .DJI was up 84.25 points, or 0.65 percent, at 13,141.71. The Standard & Poor's 500 Index .SPX was up 7.45 points, or 0.53 percent, at 1,409.53. The Nasdaq Composite Index .IXIC was up 17.88 points, or 0.59 percent, at 3,071.28.
The S&P 500 briefly fell below the 1,400 level earlier in the morning following cautious comments from German Chancellor Angela Merkel about Greece staying in the euro zone.
It was the first time in two weeks the benchmark dipped below that level. The index hasn't closed below 1,400 since the first Monday of August and was on track for only its first weekly decline in seven.
Trading volume was expected to be low until the annual economic symposium at Jackson Hole, Wyoming, where Fed Chairman Ben Bernanke and ECB President Mario Draghi will speak next week.
Data showed new orders for long-lasting U.S. manufactured goods surged in July, even as declines in a gauge of planned business spending pointed to a slowing growth trend in manufacturing.
The mixed data added to the market uncertainty on whether the Federal Reserve will soon act in support of the economy.
Autodesk (ADSK.O) shares were downgraded by various brokerages a day after the design software maker's quarterly results fell short of expectations for the first time in nearly two years. Shares tumbled 15.2 percent to $30.27.
Supervalu (SVU.N) shares jumped 9.9 percent to $2.33 as its advisers sought potential buyers to bid for the entire business, even as several suitors have inquired about individual parts of the U.S. grocery company, according to a Bloomberg report.
© Thomson Reuters.
