Brutal Month Ends With a Small Rally

NEW YORK, Oct. 31 -- U.S. stocks rallied Friday afternoon, capping one of the worst October performances on record, characterized by giant swings and unprecedented volatility.

The Dow Jones industrial average surged at the end of a rocky day. The blue-chip index, which had been up more than 200 points at times during the day, closed up 1.57 percent, or 144.32, at 9325.01. Although it was a good week for the Dow, the index was down about 14 percent for the month, making it the worst October since 1987.

The broader Standard & Poor's 500-stock index gained 1.54 percent, or 14.66, to end the month at 968.75. It had a 17 percent monthly loss. The tech-heavy Nasdaq composite index rose 1.32 percent, or 22.43, to 1720.95. That was a monthly drop of nearly 18 percent.

Stocks experienced dramatic fluctuations last month, including a 936-point gain for the Dow after the Treasury moved to make direct investments in major banks and a drop two days later of 733.08, the second-biggest point loss ever.

On Friday, the market rallied for the second day in a row. This week's 10.5 percent jump on the S&P 500 was the largest weekly percentage gain since October 1974 and was largely in reaction to the Federal Reserve's interest rate cut. "The aggressive buying is in response to the aggressive selling," said Carter Braxton Worth, chief market technician at Oppenheimer. "Just like people panic on the way out, they panic on the way in."

Still, signs abounded that the economy is headed for a recession. The price of crude oil fell by 32 percent in October, its biggest monthly drop on record. While the lower prices are good for consumers at the gas pump, they "reflect a slowing global economy and a lower demand for oil," said Warren West, head trader at Greentree Brokerage Services in Philadelphia.

Throughout the month, the market reacted to dismal news. Companies including Whirlpool, Avis Budget Group and American Express announced layoffs. Merger talks between GM and Chrysler stalled amid speculation that a collaboration would spur thousands of job cuts. Meanwhile, gross domestic product entered negative-growth territory this month and consumer confidence reached its lowest level on record.

But investors may have been heartened by a decline in bank lending rates that many economists use to measure the availability of credit. The cost for banks to borrow money for three months from each other in London, or three-month Libor, fell from more than 3.19 percent to less than 3.03 percent. Among the stocks that gained Friday were J.P. Morgan Chase, Playboy Enterprises, Las Vegas Sands and Blockbuster.

Haynes reported from Washington.