By Dan Strumpf
Stocks rose sharply Friday, bouncing back from the biggest loss
for major benchmarks in two months.
The Dow Jones Industrial Average rose 196 points, or 1.2%, to
17142, extending its gains through the afternoon. The S&P 500
index added 19 points, or 1%, to 1985. The Nasdaq Composite Index
climbed 47 points, or 1.1%, to 4514.
The Dow was buoyed by a rally in shares of Nike Inc., which
reported a 23% increase in quarterly profits. Shares of the
shoemaker surged 12%.
Investors were cautiously stepping in after Thursday's selloff,
though volumes were relatively subdued, a sign that some investors
were opting for a wait-and-see approach, traders said. On Thursday,
the Dow shed 1.5% and the S&P 500 declined 1.6% amid a flurry
of concerns over economic growth and geopolitical tensions.
"We certainly have some buyers stepping back into the market in
certain areas, but it's not one where we see folks buying things
hand over fist, " said Scott Bacigalupo, head of Americas cash
equities sales and trading at Bank of America Merrill Lynch. "It's
people putting their toe in the water again."
Recent action leaves the major indexes poised for weekly losses.
The S&P 500 is off 1.5% this week.
Still, many long-term money managers remain optimistic about the
outlook for stocks, arguing that steady economic growth in the U.S.
means that the market can handle tighter Fed policy. Investors
widely expect the central bank to raise rates sometime next year
after winding down its bond-buying program in October.
Investors on Friday got additional evidence that the economic
recovery remains intact. Before the open, the Commerce Department
reported that the U.S. economy grew at a rate of 4.6% in the second
quarter, up from a previous estimate of 4.2%. The result was in
line with expectations. The reading on September's consumer
sentiment of 84.6, up from August's 82.5, was in line with
expectations.
"Ultimately strong economic growth is good for the markets,"
said Doug Coté, chief market strategist at Voya Investment
Management, which manages $214 billion. "I'm a buyer at these
levels."
Stocks were mixed overseas. Japan's Nikkei Stock Average fell
0.9% to 16,229.86, dropping back into negative territory for the
year. In Europe, the Stoxx Europe 600 index gained 0.3% Friday but
declined 1.8% for the week.
The dollar continued to strengthen against major rivals. The
euro fell to $1.269 from $1.268 late Thursday.
The yield on the benchmark 10-year Treasury note rose to 2.534%,
according to FactSet. Yields move inversely with prices.
Investors on Friday continued to grapple with the reasons behind
Thursday's selloff. While many attributed it to actions in Russia
that seemed to pave the way for deeper tensions with the West,
others cited unease with high stock prices and uncertainty over the
Fed's timeline for monetary tightening.
"Can equities rally in light of rates rising? I think that's
what some investors are trying to figure out and whether there is
an answer to that," Mr. Bacigalupo said.
Others viewed the decline as a return to normal trading patterns
after a sleepy summer for stocks. Investors must have to contend
with a number of uncertain variables as they enter the fourth
quarter, including the Fed's future course, the outlook for
Europe's stalling economy and a slowdown in growth in China, they
said.
"You should expect more volatility than we've had in the past
couple years, and this week is a bit of a taste of that," said Russ
Koesterich, chief investment strategist at BlackRock.
For Friday "it looks like the market has quieted down," Mr.
Koesterich said. "A couple things are helping--the GDP print was in
line, and also we didn't see a lot of follow-through selling
overseas."
Shares of Janus Capital Group Inc. surged 39%. Bill Gross,
co-founder of Pacific Investment Management Co., will join Janus
next week. U.S.-traded shares of Allianz SE, the German insurer
that owns Pimco, fell 6.2%.
In other corporate news, BlackBerry Ltd. posted earnings
results, which included a smaller-than-expected loss and a sharp
drop in revenue. Shares rose 4%.
Shares of Apple Inc. rose 2.4%. The company has been defending
itself against reports that its new, larger iPhone bends easily in
people's pockets. The company also released an new update of
software for its mobile devices after yanking its previous
update.
Corrie Driebusch contributed to this article
Write to Dan Strumpf at daniel.strumpf@wsj.com