US stocks ended in a rally Friday, with the Dow Jones Industrial Average rocketing 302 points, as world oil prices dived, soothing fears that fresh inflationary pressures could singe an already ailing economy.
The Dow soared 2.65 percent to close at 11,734.32 as trading ceased for the day.
The tech-heavy Nasdaq composite meanwhile leapt 58.37 points (2.48 percent) to 2,414.10 while the broad-market Standard & Poor's 500 index spiked 30.25 points (2.39 percent) to 1,296.32.
Traders said tumbling oil prices had given Wall Street a hefty boost after a key New York oil futures contract slumped 4.82 dollars to close at 115.20 dollars a barrel. Oil prices have now fallen from record highs of over 147 dollars last month.
The decline in oil prices raised hopes that the economy might be able to shrug off inflationary threats and expand more easily.
A rising dollar helped suppress oil prices and boost optimism further, as the euro briefly fell under 1.50 dollars for the first time since February.
Investors meanwhile appeared to largely shrug off an announcement from mortgage finance giant Fannie Mae that it had sustained a quarterly loss of 2.3 billion dollars.
Fannie Mae reported a loss per share of 2.54 dollars, compared with analyst projections of 0.69 dollars, which it mainly attributed to provisions for losses related to the US housing downturn.
The lingering housing slump has continued to roil the finances of some large companies exposed to the ailing US mortgage market.
Fannie Mae's stock closed down 9.0 percent at 9.05 dollars while fellow mortgage finance firm Freddie Mac -- which reported a loss of 821 million dollars on Wednesday -- finished 0.7 percent higher at 5.90 dollars.
Despite Wall Street's gains, the credit crunch continued to plague major banks as UBS said it had struck a deal with US regulators under which it has agreed to buy back 19.4 billion dollars' worth of tainted securities.
The deal relates to so-called auction rate securities which once provided lucrative income to major banks, but have suffered in value since the market for such securities imploded in February as the credit squeeze worsened.
Traders said there would likely be extended focus on the banking sector in the coming week following Citigroup's deal on Thursday with regulators to buy back billions of dollars in securities in a similar deal.
The 7.5-billion-dollar buyback forms part of a preliminary settlement Citigroup has reached with the Securities and Exchange Commission and other regulators tied to its marketing of auction rate securities.
Analysts predict that other large banks and brokerages will soon strike similar settlement deals with the SEC and other regulators in relation to their marketing of such securities.
Citigroup closed up 4.9 percent at 19.39 dollars amid the wider market gains.
Bond prices were mixed as the yield on the 10-year US Treasury bond rose to 3.950 percent from 3.935 percent Thursday, while that on the 30-year bond dropped to 4.555 percent from 4.564 percent.
Bond yields and prices move in opposite directions.
Europe's main stock markets closed higher as London's FTSE 100 index added 0.21 percent to close at 5,489.20. In Paris, the CAC 40 rose 0.77 percent to 4,491.85, while in Frankfurt the Dax ended 0.28 percent higher at 6,561.65.
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