Stocks Rebound on Renewed Bailout Hopes

"We saw a rally at the end of the day on anticipation that something is going to be done over the weekend," said Paul Mendelsohn, chief investment strategist with Windham Financial. "To not do something will have catastrophic effects for bank stocks come Monday. Traders have no idea if their positions and hedges will work on Monday."

Despite concerns over the fate of the rescue plan, bank stocks were the big winners of the session, propping up the Dow and S&P 500. JPMorgan Chase jumped 11% and was the Dow's best performer, while Bank of America (BAC Quote) added 6.8% and Citigroup (C Quote) rose 3.8%.

One laggard in the financial sector was Wachovia (WB Quote), which sank more that 40% during the session before regaining some of those losses after a late report by The New York Times that it was in early deal talks with Citigroup.

Despite the strong finish, the Dow still ended the week lower by 2.2%. The S&P 500 fell 3.3% over the last five sessions, and the Nasdaq lost about 4%.

For the day, roughly 5.32 billion shares changed hands on the New York Stock Exchange, with decliners beating advancers by a 2-to-1 margin. On the Nasdaq, nearly 2 billion shares changed hands as decliners outpaced advancers 3 to 2.

Looking at corporate earnings, BlackBerry maker Research In Motion (RIMM Quote) reported second-quarter profit that was just short of expectations and offered tepid third-quarter guidance. The forecast sent its shares sharply lower in after-market trading.

Ahead of the final session of the week, Jabil Circuit (JBL Quote) said its quarterly earnings rose, while KB Home (KBH Quote) posted a loss.