Stock watch

On Friday:

The Dow Jones industral average ended up 185.66, or 1.1%, to 16,553.93.

The S&P 500 rose 22.02, or 1.2%, to 1,931.59.

The Nasdaq rose 35.93 points, or 0.83%, to 4,370.90.

AP

A burst of buying Friday in U.S. stocks defied slumps in other markets and offered hope for investors shaken by geopolitical turmoil. Major U.S. stock indexes closed up around 1 percent, buoyed by signs that tensions in Ukraine might be easing.

The rally on Wall Street contrasted with price declines in European and Asian stock markets. Fear has been creeping into stock and bond markets around the world in recent weeks against a backdrop of escalating global conflicts.

News Friday of U.S. fighter jets dropping bombs in Iraq and the end of a three-day cease-fire in Gaza weighed further on European and Asian markets. The declines there capped broad losses for the week. As anxieties have risen in recent days, money has been flowing from around the world into U.S. Treasurys, the perennial safe haven for spooked investors.

U.S. stock markets bucked the trend Friday as investors snapped up shares that had been beaten down in recent days. The buying surged late in the day on reports that Russia had ended military exercises near Ukraine.

Jim Paulsen, chief investment strategist at Wells Capital Management, said he wasn't surprised by the rally.

"The U.S. economy will grow at 3 percent or 4 percent for the rest of the year," Paulsen said. "Are geopolitical risks really going to have an economic impact?"

It's a question that's been unsettling investors.

In June and most of July, prices in major U.S. stock indexes rose even in the face of the widening conflicts around the world. Some experts warned that markets had grown dangerously complacent.

But then the West imposed increasingly crushing sanctions on Russia for supporting rebels in Ukraine. Israel's bloody war in Gaza dragged on. And Sunni extremists made advances in northern Iraq.

Prices then began a sustained decline, even in resilient U.S. markets. U.S. stocks in July posted their first monthly loss since January.

Another sign of worry, the VIX, a gauge of expectation of future U.S. stock volatility, has climbed nearly 50 percent since early July.

One fear is that Europe could fall back into another recession after having emerged from one last year.

Also, the troubles in Iraq also threaten oil supplies.

At the same time, a new report from Citi noted there was reason to keep buying stocks, not the least of which is strong corporate earnings.

An announcement from Gap on Friday underscored that trend. It reported that sales increased 3 percent in the second quarter as growth at Old Navy offset lower sales of the company's namesake brand.

With nearly all second-quarter results for S&P 500 companies out, analysts are calling for earnings in that index to jump 10 percent from a year earlier. At the beginning of July, they expected a gain of less than 7 percent, according to S&P Capital IQ, a data provider.