Blue chips get Bernanke boost

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NEW YORK (CNNMoney.com) -- Blue chips gained Friday in a choppy session in which investors welcomed comments from Fed chair Ben Bernanke that implied further interest rate cuts are on the way, but showed some caution after a three-day advance.

The Dow Jones industrial average (Charts) added 0.4 percent, according to early tallies. The broader S&P 500 index (Charts) gained 0.8 percent. The tech-fueled Nasdaq (Charts) composite lost 0.3 percent.

Stocks rallied through the morning as investors welcomed falling oil prices and comments from Fed chief Ben Bernanke that suggested more rate cuts are on the way. The two developments helped ease worries that the turmoil in financial markets could send the economy into a recession.

But gains were limited in the afternoon by tech weakness, caused in part by disappointment about Dell's quarterly results.

Here's a look at what was moving near the close.

"A rate cut would be a shot in the arm to the markets and I think people are taking Bernanke's speech as meaning that another rate cut is coming, but stocks have been choppy and are going to remain choppy," said Dean Barber, president at Barber Financial Group.

Bernanke said Thursday night that the Fed remains concerned about the problems in the housing and credit markets and the threat posed to consumer spending and the economy. He said the Fed would remain "exceptionally alert and flexible" leading up to the next policy meeting on Dec. 11, all of which seemed to signal to Wall Street that the Fed will cut rates again.

Traders are currently betting that the central bank will cut rates by at least a quarter percentage point at the next meeting, with some banking on a half-point cut.

The Fed has cut interest rates at the last two policy meetings, lowering the fed funds rate, a key short-term interest rate, by 75 basis points since September. There are 100 basis points in one percentage point.

Stocks surged Wednesday after Donald Kohn, the Fed's No. 2 official, also hinted at rate cuts in a speech, saying that the central bank needs to be "nimble" in the face of the economic uncertainty.

Also helping stocks Thursday: reports that the White House and the major banks are nearing a deal that would temporarily freeze interest rates on certain subprime mortgage rates.

Stocks have also gotten a boost this week from technical factors, following Monday's selloff. That decline left the three major gauges down at least 10 percent from the October highs, the definition of a "correction." Traders seemed to be using that "correction," as an opportunity to get back into stocks at lower levels.

In other news Friday, personal income and spending gains slowed in October, missing forecasts. The core PCE deflator, the report's inflation component and a measure watched by the Fed, rose 0.2 percent, in line with forecasts.

A separate report, the Chicago PMI, rose to 52.9 in November, up from the previous month and topping expectations. The report tracks manufacturing activity in the Midwest. Another report showed a surprisingly large drop in construction spending in October, following a small increase in the previous month.

In corporate news, Dell (Charts, Fortune 500) reported higher quarterly sales and earnings late Thursday that were nonetheless short of forecasts. Shares fell 14 percent Friday.

Brocade Communications (Charts) fell 6 percent on the Nasdaq after warning that first-quarter earnings could miss expectations, due to the mixed corporate spending environment.

Morgan Stanley (Charts, Fortune 500) said Thursday night that co-President Zoe Cruz will leave the bank. On Friday, Motorola said that its president and chief operating officer Greg Brown will take over as the company's new CEO, after the current CEO steps down Jan. 1.

Market breadth was positive. On the New York Stock Exchange, winners beat losers by more than two to one on volume of 1.19 billion shares. On the Nasdaq, advancers topped decliners by a narrow margin on volume of 2 billion shares.

Treasury prices cut losses by the end of the session, with the yield on the 10-year note at 3.94 percent, up from 3.93 percent late Thursday. Treasury prices and yields move in opposite directions.

In currency trading, the dollar gained versus the euro and the yen.

U.S. light crude oil for January delivery fell $2.30 to settle at $88.71 a barrel on the New York Mercantile Exchange.

COMEX gold for February delivery tumbled $13.20 to settle at $789.10 an ounce, falling along with other dollar-traded commodities.