US stock markets closed on Friday with their best weekly gain in nearly two months, rebounding as investors rethought the odds of a new recession and a flicker of optimism returned to Wall Street.
The Dow Jones Industrial Average gained 4.32 percent for the week, closing at 11,284.54. However, it is still down about more than 11 percent from its summertime peak late last month.
The broader S&P 500 rallied 4.74 percent for the week to close at 1,176.80 on Friday, while the tech-heavy NASDAQ surged 5.89 percent to 2,479.85.
Markets had fallen for the past four weeks amid fears that the US could be slipping into another economic slowdown, aggravated by concerns about fallout from the eurozone’s sovereign debt crisis.
“People are less afraid,” Meeschaert Capital Markets president Gregori Volokhine said.
“They realized that the risks of a recession had maybe been exaggerated, since recession is not the same as 1 percent growth, but a contraction,” Volokhine added.
The US economy grew at a sluggish 1 percent pace in the second quarter, according to revised data released on Friday.
However, US Federal Reserve chairman Ben Bernanke, in a highly anticipated speech, said he expected growth to pick up speed in the second half of this year, helping reassure the markets.
In the week ahead, markets will try to gauge the impact of Hurricane Irene, which is expected to cause billions of dollars in damage as it slams into the east coast of the US over the weekend.
The New York Stock Exchange is still planning to open tomorrow, although its building is just blocks away from low-lying areas of Manhattan that have been ordered to be evacuated ahead of the storm.
Later in the week, investors will focus on some key economic data releases, including the Institute for Supply Management’s index on the health of the US manufacturing sector, to be published on Thursday.
The release of the official unemployment rate for this month on Friday will also provide insight into whether the deeply depressed US labor market is showing any signs of recovery.
“What we need is good news in the employment side of things, but there is a chance we might not get good news,” Hugh Johnson of Hugh Johnson Advisors said. “It’s too soon to celebrate.”