Stocks close huge week with rally

A rebound in U.S. manufacturing pleasantly surprised investors Friday, sending the Dow Jones industrial average up nearly 170 points.

The Dow ended up 648 points, or 5.4 percent, for the week, its best in two years.

The rally started Monday after Nike reported strong quarterly results. The company's revenue, which exceeded analysts' predictions, indicated that many shoppers are still splurging on pricier sneakers and sportswear. Then, on Thursday, Greece cleared its final hurdle before it receives its next round of loans to avoid default on its debt. The same day, a report showed that manufacturing in the Chicago region had picked up unexpectedly.

Then, Friday's Institute for Supply Management report showed that manufacturing across the country had expanded, reinforcing the growing perception that the slowdown was temporary. Federal Reserve chairman Ben Bernanke and several prominent economists have argued that the economy will pick up again once the effects of the Japan disaster wane and high gas prices recede.

It's quite a turnaround from May and early June. Many economists and analysts began lowering their estimates for growth in May after a string of negative reports on manufacturing, consumer spending and hiring by private companies.

A shortage of computer chips and auto parts from Japan, higher gas prices and severe weather in the South all contributed to what appeared to be a slowdown in the economic recovery. Stocks had lost most of their gains for the year by mid-June.

Todd Salamone, an investment strategist at Schaffer's Investment Research, said he thought the recent surge in stocks represented an "unwinding of the tremendous negativity that built up over the past few weeks."

The Dow rose 168.43 points, or 1.4 percent, to 12,582.77 on Friday. The Standard & Poor's 500 index gained 18.94, or 1.4 percent, to 1,339.67. The Nasdaq composite added 42.51, or 1.5 percent, to 2,816.03.

It was the fourth time this week that the Dow gained more than 100 points. The Dow's 648 point gain for the week is its largest since the bull market began in March 2009. It is up 8.7 percent for the year, about 2 percent below its April high. The S&P is up 6.5 percent for the year. It had been up as high as 8.4 percent.