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The markets were solidly in the green as traders cheered the Group of Seven's intervention to restrain the soaring yen and numerous large banks reinstated dividends and share buyback programs.
The Dow Jones Industrial Average was up 83.9 points, or 0.71%, to 11858, the S&P 500 climbed 5.5 points, or 0.43%, to 1279 and the Nasdaq Composite was higher by 7.6 points, or 0.29%, to 2643. The FOX 50 gained 2.7 points to 901.
A rally that sent the Dow gaining more than 100 points lost some of its steam toward the end of the session as traders took profits ahead of a weekend filled with geopolitical uncertainty, according to Peter Kenny, managing director at Knight Capital Group.
The financial sector led the rally after the Federal Reserve gave 19 of the country's largest banks permission to resume paying cash dividends to shareholders after it completed its stress tests on the companies. Numerous banks, such as JPMorgan (NYSE:JPM) and Wells Fargo (NYSE:WFC), reacted quickly, raising their dividends and announcing share repurchase programs.
"The combination of a less bad situation [in japan] combined with what’s going on in Libya has boosted the markets," said Carlton Neel, senior managing director at Virtus Investment Advisers.
Despite a two-day winning streak, major market averages ended the week with steep losses. The Nasdaq had the worst performance, shedding 2.7%, the blue chips dropped 1.6% and the broad S&P 500 sunk 1.9%.
The Group of Seven's rare foray into the currency markets came amid fears an extremely high exchange rate for the yen, as compared with other world currencies, would make it more expensive for other countries to import Japanese goods, putting yet another strain on the beleaguered nation. The run-up in the yen's exchange rate occurred largely due to so-called repatriation, which is when investors liquidate foreign assets to pay for reconstruction at home, analysts say.
The dollar surged 2% against the yen, but some market participants questioned the long-term impact of the G-7's move.
"While the news has been highly effective in reversing the strength of the yen, it is just a one day act for now," wrote Peter Bookvar, managing director at Miller Tabak + Co, in a research note.
Traders kept a close eye on the situation in North Africa and the Middle East that has caused significant volatility in the energy markets.
The United Nations approved a no-fly zone over Libya and authorized nations to take "all necessary measures" to protect civilians. The resolution opens the door for strikes against Muammar al-Qaddafi's army in the oil-producing country. Rebels had repeatedly called for support from Western countries as they were bombarded Qaddafi's forces.
Oil had been trading significantly higher, near the $104 a barrel level, and then plummeted to below $101 in mere seconds on reports Libya's Foreign Minister declared an immediate ceasefire.
Light, sweet crude lost 35 cents, or 0.35%, to $101.07 after soaring 3.5% Thursday. At the consumer level, the average price for a gallon of regular was $3.54, up from $3.13 a month ago and $2.80 last year, according to the AAA Fuel Gauge Report.
The situation in Yemen appeared to escalate Friday as government forces and protesters clashed. As many as 44 people died in the fighting, according to Dow Jones Newswire, citing medics on the ground.
Sinking energy prices put downward pressure on petroleum-based issues issues like Hess (NYSE:HES) and Tesoro (NYSE:TSO), causing them to lag behind the broader market.
Despite gains on thee day, market participants were still cautious about short-term volatility in equity markets. Indeed, the VIX, a gauge of volatility, has soared 79% since last month.
"I’m not highly confident in the next two to three weeks because there are some pretty dark clouds looming," Neel said.
In metals, gold was up $11.90, or 0.85%, to $1415.
General Mills (NYSE:GIS) said it is in advanced talks to acquire a 50% stake in yogurt-maker Yoplait, in a deal that would value the company at roughly $2.2 billion, according to a private equity company involved in the deal.
Cisco Systems (NASDAQ:CSCO) will pay its first-ever cash dividend of 6 cents a share.
Pfizer (NYSE:PFE) and Bristol Myers Squibb's (NYSE:BMY) blood thinning drug, Eliquis, garnered support from European regulators for fighting a condition called venous thromboembolic events, which is when blood clots form in the wrong place within a vein. Bayer, the German pharmaceutical company, makes a competing product called Xarelto.
Quest Diagnostics (NYSE:DGX) agreed to acquire Celera Corporation (NASDAQ:CRA) for $8 a share, or $344 million -- a $1.73 premium to Celera's closing price Thursday.
SunTrust (NYSE:STI) plans on raising $1 billion through a stock offering to help pay repay $4.9 billion in U.S. government bailout aid.
Global stocks were largely in the green Friday.
The Japanese Nikkei 225 average jumped 2.7% to 9206, but still plunged 10% for the week in the wake of the destruction caused by the earthquake and tsunami last week. The Chinese Hang Seng inched 0.7% higher to 22300.
In Europe, the English FTSE 100 was up 0.39% to 5718, the French CAC 40 climbed 0.63% to 3810 and the German DAX was higher by 0.11% to 6664.