Stocks get Fed fuel injection

NEW YORK (CNNMoney.com) -- Stocks surged at the start of Friday's session, with the Dow industrials soaring as much as 319 points, after the Federal Reserve in a surprise move, cut the symbolic discount rate.

The Dow Jones industrial average (up 304.26 to 13,150.04, Charts)'s gain eased to more than 245 points, or nearly 2 percent, in early trading.

The broader S&P 500 (up 33.78 to 1,445.05, Charts) jumped 2.3 percent, while the tech-fueled Nasdaq Composite index (up 69.68 to 2,520.75, Charts) gained 2.2 percent.

The Federal Reserve surprised Wall Street by cutting the discount rate, which the central bank charges qualified lenders - mainly banks - for temporary loans, by 50 basis points to 5.75 percent.

The move, while largely symbolic, was an attempt by the central bank to "promote the restoration of orderly conditions in financial markets," the Fed said in a statement.

While it did not cut the closely watched fed funds rate, the action did sooth jittery investors who been gripped by uncertainty about the extent of the subprime mortgage and credit market crisis.

Treasury prices turned mixed on the news, with shorter-term debt moving higher. The 10-year benchmark note held steady at 4.68 percent from late Thursday. Bond prices and yields move in opposite directions.

Wall Street had been bracing for another bumpy session Friday, just a day after major gauges fell to a point that marked a 10 percent decline from highs reached earlier this year, signaling a market correction.

Stocks, however, made a stunning recovery, with the Dow industrials and Nasdaq finishing slightly lower.

In corporate news, Dow component Hewlett-Packard (up $1.61 to $47.66, Charts, Fortune 500) reported better-than-expected earnings and issued a stronger-than-forecast outlook late Thursday, sending its shares about 3 percent higher.

Shares of organic grocer Wild Oats Markets (up $2.77 to $17.98, Charts) soared more than 18 percent after a bid by federal antitrust regulators to temporarily block its purchase by rival Whole Foods Market (up $2.77 to $43.94, Charts, Fortune 500) was rejected by a federal judge.

Early Friday morning, Midwest Express (up $1.29 to $15.99, Charts) accepted a raised $17-a-share offer to be purchased by a group led by private equity firm TPG Capital and Northwest Airlines (up $0.23 to $16.21, Charts, Fortune 500), ending the hostile bid for the company by rival AirTran Holdings.

Overseas, markets in Europe soared in afternoon trade after the Fed cut the discount rate. But Asian markets tumbled Friday, with Japan's Nikkei index tumbling 5 percent, posting its worst day since the Sept. 11 attacks.

The dollar gained versus the yen and eased against the euro.

Oil prices jumped over $1 a barrel following the Fed's rate cut, and helped by the growing strength of Hurricane Dean. Oil rose 93 cents to $71.92 a barrel on the New York Mercantile Exchange.