A burst of buying in US stocks defied slumps in other markets and offered hope for investors shaken by geopolitical turmoil.
Major US stock indexes closed up around 1% yesterday, 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 of US fighter jets dropping bombs in Iraq and the end of a three-day ceasefire in Gaza weighed further on European and Asian markets.
The declines there capped broad losses for the week, including a 5% drop in Japan's major stock index.
US stock markets bucked the trend 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.
The Dow Jones industrial average surged 1.1%, its biggest gain since March. The index remains 3.4% below its record high set July 16.
Jim Paulsen, chief investment strategist at Wells Capital Management, said he was not surprised by the Wall Street rally.
"The US economy will grow at 3% or 4% for the rest of the year," he said. "Are geopolitical risks really going to have an economic impact?"
It is a question that has been unsettling investors.
In June and most of July, prices in major stock indexes in the US 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 US markets. US stocks in July posted their first monthly loss since January.
The fear has driven up various government bond prices, too, and sent yields down. The yield on German government notes maturing in 10 years, for instance, hit an all-time low yesterday.
The yield on US notes of the same maturity has reached its lowest level in about a year.
Another sign of worry, the VIX, a gauge of expectation of future US stock volatility, has climbed nearly 50% since early July.
One fear is that Europe could fall back into another recession after having emerged from one last year.
The economies of the 18 countries that share the euro currency are barely growing, and many of them depend on Russia for natural gas imports. Germany imports nearly all its natural gas from Russia.
This week, the head of the European Central Bank, Mario Draghi, warned that the crisis in Ukraine could hurt the fragile recovery in the region.
The troubles in Iraq also threaten oil supplies. A report from Citigroup to clients early yesterday noted that Iraq is the fastest-growing supplier among OPEC members.
Benchmark U.S. crude oil rose 31 cents to close at $97.65 a barrel on the New York Mercantile Exchange.
Brent crude, a benchmark for international oils used by many US refineries, fell 42 cents to close at 105.02 dollars on the ICE Futures exchange in London.
The Citi report also noted, though, that there was reason to keep buying stocks, not the least of which is strong corporate earnings.
With nearly all second-quarter results for S&P 500 companies out, analysts are calling for earnings in that index to jump 10% from a year earlier.
At the beginning of July, they expected a gain of less than 7%, according to S&P Capital IQ, a data provider.
Yesterday, the Dow ended up 185.66 points, or 1.1%, to 16,553.93. The Standard & Poor's 500 index rose 22.02 points, or 1.2%, to 1,931.59. The Nasdaq composite rose 35.93 points, or 0.83%, to 4,370.90.
In economic news, the US labour department reported that workers were more productive in the April-June quarter and that labour costs rose slightly, a sharp turnaround from grim first-quarter figures.
Productivity increased 2.5% at a seasonally adjusted annual rate, after plummeting 4.5% in the first quarter.
In Europe, Germany's DAX fell 0.3% while the FTSE 100 index of British shares dropped 0.5%. Both indexes are down about 2% for the week, capping three weeks of losses.
France's CAC-40 was flat, but ended the week down 1.3%. That was its third straight weekly loss.