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Volatile week ends with sharp gains

Falling oil prices, improved inflation forecast fuel market.

NEW YORK — Wall Street capped a volatile week with sharp gains Friday as oil prices tumbled and after Federal Reserve Chairman Ben Bernanke said inflation pressures are likely to moderate.

Speculation that Lehman Brothers Holdings Inc. could be sold helped buoy the financial sector and the overall market. Analysts warned this week that the investment bank could book large write-downs for bad debt. But reports Friday that Korea Development Bank is considering buying the company sent investors rushing for the stock.

John Massey, portfolio manager at AIG SunAmerica Asset Management, said investors are encouraged by Bernanke’s comments on interest rates and by the possibility of a buyer for Lehman.

“We’re seeing the potential for maybe another white knight,” he said, referring to prospects of a deal to acquire all or part of the investment bank.

The health of the financial sector and rising inflation are two of the market’s greatest concerns. Although Bernanke refrained from making predictions about inflation, the market was mollified when light, sweet crude plunged $6.59 to settle at $114.59 a barrel on the New York Mercantile Exchange, after surging by more than $5 a barrel on Thursday.

The run-up Friday left stocks with mostly modest losses for the week that again saw a series of triple-digit moves in the Dow. The Dow is down 0.27 percent, the S&P 500 is off 0.46 percent and the technology-heavy Nasdaq is down 1.54 percent.

Massey cautioned against making too much of the market’s moves given the light volume this week. With traders squeezing in late-summer vacations, Wall Street has shown erratic trading. The Dow industrials lost more than 300 points over Monday and Tuesday before ending moderately higher Wednesday and finishing mixed Thursday.

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