Investors charged back into the markets Friday, lifting bank stocks 3% to 4% and the Dow Jones industrial average 2.47% as fears of interest rate hikes diminished on reports of lower-than-expected job growth.

Generally, regional banks did better than money-center banks. The Nasdaq bank index, which includes 721 banks, climbed 4.36%, while the Standard & Poor's index of 31 of the biggest banks rose 2%. The Dow Jones industrial average climbed 2.2%, and the S&P 500 rose 2.9%.

It was a 180-degree swing from Thursday, when government reports and a statement by Federal Reserve Governor Edward Kelley led investors to believe that the central bank would again raise interest rates to quash incipient inflation.

Both the bank stock and overall equity markets swung wildly Friday. Government figures indicated that employment growth was less than analysts had expected. That meant less danger of inflation and less pressure on the Fed to raise rates.

"Between now and yearend we can expect more emotional swings like this," said Joseph Stieven, a banking analyst at Stifel Nicolaus & Co. of St. Louis. Referring to the roller-coaster-like market, Friday's activity was just another "bounce," Mr. Stieven said.

Only 124,000 jobs were cAugust, the Labor Department reported, far below analysts' expectations of 223,000. The unemployment rate fell to 4.2%, compared with 4.3% in July.

The August employment report was "market friendly," said Bruce Steinberg, chief economist at Merrill Lynch World Markets. With hourly wages edging up by just 0.2%, "there are no visible wage pressures in the economy," he said.

"A little bit of news on the economy went a long way toward driving bank stocks up," said James Bradshaw, an analyst with Pacific Crest Securities of Portland, Ore.

He said that trading was light throughout the day as many investors started their three-day weekends early.

Bank stocks also may have been rising in anticipation of a merger announcement, Mr. Bradshaw said. "Traditionally three-day weekends have been good times for deals to be announced," he said.

Despite his prediction of continuing wide swings in bank stocks, Mr. Stieven advised investors to buy into the market's strength. "Rallies are a good time to reposition, so you get into stocks with very solid operations," he said.

Mr. Steinberg suggested a bit of caution might be appropriate. Though he believes the economy could handle a 4% rate of growth in the second half without incurring inflation, he said the Fed may not agree. Even if the Fed does not increase rates at the Oct. 5 meeting of its Open Market Committee, "we can't rule out a tightening" at the Nov 16 meeting," he said.

In contrast to Friday's upbeat news on the inflation front, Thursday was decidedly down. Disquieting comments by Mr. Kelly about the direction of interest rates and reports that the economy was surging led to fears that the Fed would raise interest rates for a third time this year.

Investors were also shaken by reports of alleged money laundering and fraud at U.S. banks, including activities at Bank of New York Corp. and a review of Republic New York Corp that the bank may have inflated net asset values for a client.

On Friday, though, J.P. Morgan & Co. rose $7.875, or 6.3%, to $133.8125. Chase Manhattan Corp added $4.0625, or 5%, to $84.1825. And Citigroup Inc. was up $1.875, or 3.8%, to $45.625.

Regional institutions jumped as well. KeyCorp was up $1.50, or 5.2%, to $30.50; Mellon Bank Corp $1.25, or 3.7% , to $34.75; and PNC Bank Corp. 1.625, or 3%, to $54.875.

Amsouth Bancorp, based in Birmingham, Ala., followed the industry trend. It rose 75 cents, or 3.41%, to $22.75. Jacqueline Reeves of Putnam, Lovell, de Guardiola & Thorton Equity Research said Friday that she expects Amsouth shares to reach $30 within 12 months. She raised her 1999 and 2000 earnings per share estimates to $1.70 and $1.95, from $1.65 and $1.85.

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