U.S. stocks bounce back as banks lead way

The stock market bounced back Friday, a day after suffering its second-worst loss of the year. Bank of America, JPMorgan Chase and other big lenders posted solid gains even though many of them had their credit ratings cut the day before.

Analysts said the downgrades from Moody's Investors Service late Thursday had been expected for months and removed some of the uncertainty that had been weighing on bank stocks.

"It's been like a cloud over the sector," said Brian Gendreau, market strategist with the broker Cetera Financial. "And look at who's going up: bank stocks. There are obviously some people who thought it would be much worse."

The Dow Jones industrial average gained 67.21 to close at 12,640.78. Bank of America gained 1.53 percent, or 12 cents, to $7.94, one of the best showings of the 30 stocks in the Dow.

In a note to clients, analysts at the investment bank Keefe Bruyette & Woods called Morgan Stanley "the clear winner." Some analysts had expected Moody's to lower Morgan Stanley's rating by three notches, instead of the two-notch cut it received.

Bank stocks rose across the board. Morgan Stanley rose 18 cents to $14.14. JPMorgan Chase climbed 48 cents to $35.99.

The Standard & Poor's 500 index rose 0.72 percent to 1,335.02 and the Nasdaq composite index climbed 1.17 percent to 2,892.42. The gains turned the Nasdaq positive for the week.

The Dow and S&P 500 finished the week lower.

The biggest drop of the week came Thursday, when a trio of weak manufacturing reports stirred fears about the global economy. The Dow lost 251 points, its second-steepest fall this year.