NEW YORK — Stocks enjoyed a rally that ended with a flourish Friday as investors put sidelined cash back to work, though many remained cautious about the outlook for Europe’s financial system in the weeks ahead.
The Dow Jones industrial average closed up 125.38 points, or more than 1.3 percent, at 10,193.39, thanks in part to a flurry of buying in the last half-hour of trading. Though the session’s gains were welcome, the average nevertheless snapped a two-week winning streak, off 4 percent for the week.
The Dow average is down 9 percent from its 2010 high, just out of territory signaling a correction to the bull market dating back to March 2009. The S&P 500 was up 1.5 percent, led by a 3.6 percent jump in its financial sector after the Senate’s approval of the biggest overhaul of the financial system since the 1930s. J.P. Morgan Chase shares rose 5.9 percent, Bank of America Corp. rose 4.5 percent, and Goldman Sachs rose 3.3 percent.
While the bill would set up new regulatory bodies and restrict the actions of financial firms, many traders have been looking forward to its passage in the short term to remove the uncertainty that came along with the months-long legislative debate over what the reforms might entail.
“As long as people feel like they know what the rules are, they feel like they can position themselves to make money,” said trader Peter McCorry of Keefe, Bruyette & Woods. “It’s the possibility that the rules might change in the middle of the game that scares people.”
Fears about Europe’s credit crisis also ebbed Friday, though most traders and analysts say they will keep a close eye on the region in the weeks ahead, with volatility likely as the euro zone works to stabilize its most heavily indebted members. On Friday, the recently battered euro recovered some ground, trading at $1.2576, up from $1.2511 late Thursday. The U.S. Dollar Index slipped 0.2 percent.
Both the lower and upper houses of Germany’s Parliament approved a contribution to the $938.33 billion aid package from the European Union and International Monetary Fund bailout.
