NEW YORK (AP) – Stocks rallied sharply Friday, with the Dow gaining 172 points on better-than-expected gross domestic product growth last quarter despite the disruptions caused by hurricanes Katrina and Rita. The major indexes finished an erratic week higher.

The upswing in economic activity for the July-September quarter soothed a market anxious for signs of the economy’s health amid fears of a downturn. The GDP figure also overshadowed a drop in consumer confidence and a weak forecast from oil company Chevron Corp.

The Dow Jones industrial average jumped 172.82, or 1.69 percent, to 10,402.77, its biggest one-day gain since April 21. Broader stock indicators were also higher. The Standard & Poor’s 500 index gained 19.51, or 1.65 percent, to 1,198.41, and the Nasdaq climbed 26.07, or 1.26 percent, to 2,089.88.

Bonds declined as stocks rose, with the yield on the 10-year Treasury rising to 4.57 percent from 4.55 percent late Thursday. The dollar was higher against most major currencies, while gold prices inched upward.

Oil traded in a narrow range despite fears that recovering Gulf Coast facilities will struggle with heating oil demand as winter makes an early approach. A barrel of light crude rose 13 cents to settle at $61.22 on the New York Mercantile Exchange.

Wall Street closed out a week of volatile trading as investors juggled mixed corporate earnings reports and renewed interest-rate worries following the nomination of top White House economist Ben Bernanke as the next Federal Reserve chief.

Bernanke, who would replace outgoing Chairman Alan Greenspan in January, is largely expected to keep the Fed’s mission of clamping inflation by slowly lifting interest rates and curbing demand. But with oil and gas prices now retreating from record levels, many fear the Fed may go overboard and send the economy sliding.

For the week, the Dow added 1.84 percent, the S&P 500 rose 1.6 percent and the Nasdaq finished 0.37 percent higher.

Friday’s positive GDP report gave investors a brighter economic picture. The Commerce Department said the economy grew 3.8 percent in the third quarter, besting economists’ forecast for a 3.6 percent gain and the 3.3 percent advance for the April-June period.

That growth helped the market look past weakening consumer confidence after the University of Michigan reported its consumer sentiment index for October sank 1.2 points to 74.2, below views for an increase to 76.

Mike Viracola, managing director at Adams Harkness, also attributed this week’s volatility to stock-specific moves as traders look to boost returns before year-end.

“I don’t think (investors) are getting that much from the individual earnings reports, causing them to switch gears” in their long-term positions, Viracola said.

Chevron’s earnings grew 12 percent last quarter, but the company estimated it lost at least $600 million from the hurricanes and other storms. The company also warned the fallout will have an even larger impact on fourth-quarter results. Chevron nonetheless rose 88 cents to $57.38.

Microsoft Corp. said late Thursday that quarterly profit climbed 24 percent on stronger demand for software that runs PCs and corporate servers, but video-game sales declined and the company issued a slightly weaker full-year earnings forecast. Still, Microsoft added 68 cents to $25.53.

Drugmaker Bristol-Myers Squibb Co. reported 27 percent profit growth last quarter, largely from selling its U.S. and Canadian nonprescription medicines business. But shares fell 53 cents to $21.14 after the company said its adjusted earnings missed Wall Street targets and lowered its full-year outlook.

As part of its reorganization, bankrupt Delta Air Lines Inc. announced plans to close down its discount carrier Song, created to compete with low-cost rivals like JetBlue Airways Corp. and AirTran Airways. The news lifted JetBlue 76 cents to $18.05, and AirTran Holdings Inc. added 19 cents to $14.40.

Advancing issues outnumbered decliners by about 3 to 1 on the New York Stock Exchange, where volume of 1.75 billion shares lagged the 1.8 billion shares traded on Thursday.

The Russell 2000 index of smaller companies gained 11.30, or 1.81 percent, to 635.33.

Overseas, Japan’s Nikkei stock average sank 0.53 percent. Britain’s FTSE 100 gained 0.59 percent, Germany’s DAX index climbed 0.41 percent, and France’s CAC-40 was lower by 0.22 percent.

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AP-ES-10-28-05 1704EDT

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