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NEW YORK (CNN/Money) -
Stocks zoomed Friday, rallying back at the end of a tough week as investors cheered a report showing the economy flourished in the third quarter, despite two massive hurricanes and surging energy prices.
Stocks gained for the week as well.
The Dow Jones industrial average (up 172.82 to 10,402.77, Charts) soared more than 170 points, or 1.7 percent. The broader S&P 500 (up 19.51 to 1,198.41, Charts) index also gained almost 1.7 percent. The Nasdaq composite (up 26.07 to 2,089.88, Charts) added nearly 1.3 percent.
Small-cap stocks gained too, boosting the Russell 2000 (up 11.30 to 635.33, Charts) by 1.8 percent.
Treasury prices slipped, lifting the corresponding yields. The dollar gained versus other major currencies.
Gross domestic product grew at a faster-than-expected 3.8 percent annual rate in the quarter, the Commerce Department said, versus forecasts for 3.6 percent growth and up from a 3.3 percent rate in the second quarter.
The report's key inflation indicator showed only a mild increase, a good sign for inflation-preoccupied investors.
The report sparked a broad rally, with investors eager to jump back in to stocks after three down days that saw the major indexes fall to within shouting distance of six-month lows.
"The S&P 500 over the last week or so has been bouncing along between 1,180 and 1,200," said Timothy Ghriskey, chief investment officer at Solaris Asset Management. "And when the market appears to be bouncing along a potential bottom, like it did this morning, that brings out the bargain hunters."
Stocks had fallen for three previous consecutive sessions as Wall Street weighed rising bond yields -- a reflection of investors' inflation jitters -- discouraging earnings forecasts and other concerns.
But the GDP report trumped any such concerns Friday, reassuring investors that the economy held up despite the considerable challenges of the fall.
"It's an all-around positive report," said Michael Swanson, senior economist at Wells Fargo. "It just goes to show the disconnect between consumer expectations and the actual performance of the economy."
Whether the rally continues next week remains to be seen. November is typically an upbeat one for the stock market, yet worries about inflation, higher energy prices and slower earnings haven't disappeared.
Investors seemed to take in stride news that I. Lewis Libby, Vice President Dick Cheney's chief of staff, was indicted on charges related to the CIA leak investigation. Libby subsequently resigned from his post.
The second-to-last trading day of October is typically the best day of the year for stocks, said Jeffrey Hirsch, editor-in-chief of Stock Trader's Almanac. The S&P has gained 81 percent of the time on that day over the last 21 years.
Oct. 28 stands out for another reason -- it was the first day of the stock market crash of 1929, when the Dow lost 23 percent over two days.
Stock movers
Gains were broad based, with 29 out of 30 Dow stocks gaining.
Microsoft (Research) shares rose 2.6 percent after posting quarterly earnings late Thursday that rose from a year ago and topped forecasts. The company also issued a second-quarter forecast that fell short of expectations. On Friday, Credit Suisse First Boston upgraded the stock.
Other Dow advancers included Verizon Communications (up $0.94 to $31.70, Research), Hewlett-Packard (up $1.16 to $27.96, Research), Caterpillar (up $1.17 to $51.07, Research), Boeing (up $1.59 to $65.64, Research) and Home Depot (up $1.13 to $40.52, Research).
Avon Products (up $3.08 to $27.79, Research) jumped over 14 percent after the cosmetics company reported a quarterly earnings that weren't as bad as had been expected.
Railroads, truckers and other transportation stocks jumped, boosting the Dow Jones Transportation (up 67.49 to 3,741.81, Charts) average 1.8 percent.
Among the components gaining, trucker Yellow Roadway (up $2.38 to $44.63, Research) climbed 5.6 percent after reporting quarterly earnings late Thursday that rose from a year ago and topped forecasts.
A number of homebuilders gained, bouncing after Thursday's selloff. The Dow Jones Home Construction (up $23.59 to $838.49, Research) index added 2.9 percent.
Oil stocks jumped too, boosting the Amex Oil (up 23.84 to 968.98, Charts) index by 2.5 percent.
On the downside, the influential semiconductor sector was under pressure after analog chipmaker Maxim Integrated Products (down $4.36 to $34.60, Research) reported quarterly earnings and revenue late Thursday that fell from a year ago. Prudential led the list of brokerages downgrading the stock Friday.
Maxim shares fell 11.2 percent. The Philadelphia Semiconductor (down 2.77 to 424.87, Charts) index, or the SOX, fell 0.7 percent, recovering from an earlier decline of 3 percent.
Bristol-Myers Squibb (down $0.53 to $21.14, Research) slipped 2.5 percent after reporting third-quarter earnings that grew from a year ago but missed analysts' estimates. The drugmaker also warned about current-quarter earnings.
Market breadth was positive. On the New York Stock Exchange, winners topped losers by eight to three as 1.74 billion shares changed hands. On the Nasdaq, advancers beat decliners two to one as 1.86 billion shares changed hands.
The strong GDP report overshadowed a weaker read on consumer sentiment from the University of Michigan. Released shortly after the open, the Michigan index fell to 74.2 in October from an earlier read of 75.4. Economists surveyed by Briefing.com thought it would be revised up to 76.2.
U.S. light crude oil rose 13 cents to settle at $61.22 a barrel on the New York Mercantile Exchange, after having swayed on both sides of unchanged throughout the session.
Treasury prices slipped, raising the yield on the 10-year note to 4.57 percent, up from 4.55 percent late Thursday. Treasury prices and yields move in opposite directions.
The dollar gained versus the euro and yen.
COMEX gold fell 80 cents to settle at $474.80 an ounce.
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