Stocks Stage Turnaround

Stocks staged a dramatic turnaround Friday, as an early sell-off on fears of inflation and an economic slowdown turned into gains by day’s end.

The market tumbled in the first hour of trading, as a record high in the trade deficit and a steepening yield curve — short-term interest rates higher than long-term ones — raised fears that the Federal Reserve would raise interest rates too far and send the economy into recession.

But after falling nearly 1% to start the day, stocks battled back to end the day in the green.

Investors will get a wealth of information next week on corporate profits and inflation, with earnings reports from HP and Dell , new Fed Chairman Ben Bernanke’s first congressional testimony and a report on wholesale inflation.

The Nasdaq rose 6 to 2261 after trading as low as 2235, the S&P 500 added 3 to 1266, and the Dow gained 35 to 10,919. Volume declined to 2.26 billion shares on the NYSE, and 2.08 billion on the Nasdaq. Advancers led 16-15 on the NYSE, but decliners held a 16-13 edge on the Nasdaq. Upside volume was 47% on the NYSE, and 60% on the Nasdaq. New highs-new lows were 84-35 on the NYSE, and 66-35 on the Nasdaq.

McAfee soared 18% after beating lowered expectations, while Oracle was unchanged on inline guidance.

Cincinnati Bell climbed 9% on its results, and TriZetto and Ultimate Software gained on their earnings.

TriQuint fell 12% on its results, and Salesforce.com dropped 10% on reports that it may have lost a large contract to Oracle.