Stocks rallied late in the day and hit a high point for the year as traders hopes for recovery climbed sharply. Most exchange-traded funds were carried along in the rally and finished up for the week. The Dow Jones Industrial Average closed up 78 points at 9864, while the Nasdaq rose 15 to 2139. The S&P 500 climbed 6 to 1071.

The Commerce Department reported an unexpected drop in the trade deficit. The deficit in international trade of goods and services fell 3.6% to $30.71 billion from a downwardly revised $31.85 billion the month before. The July trade gap was originally reported as $31.96 billion.

The decline, the first since May, was a surprise on Wall Street and marked the first time the deficit dropped in four months, as exports rose to their highest level of the year and imports eased despite higher oil prices. Economists surveyed by Dow Jones Newswires had expected a further widening in the deficit to $33.6 billion.

Although the pickup in trade is a positive sign, it's an increase driven by a weak dollar, another investor concern. Federal Reserve Chairman Ben Bernanke said late on Thursday that the Fed will reverse course and tighten policy when the economic outlook improves, though he said accommodative policy will still be needed for an extended period.

As of 4:06 p.m., the front-month November light, sweet, crude contract on the New York Mercantile Exchange traded 43 cents higher at $72.20 a barrel. Gold was trading at about $1,062 an ounce. For a detailed rundown on Friday s trading session see our market story.

Winners

After silver topped a recent high of $17.81 an ounce, the iShares Silver Trust fund picked up 9.2% for the week. Surges in crude oil prices pushed up shares of the Energy Select Sector SPDR fund 8.2%.

Losers

The rally in stocks hit the iShares Barclays 20+ Year Treasury Bond fund, which declined 3.7% for the week. A Friday dip in natural gas prices sent the United States Natural Gas fund to a net loss of 1.0% for the week.

This Week s Industry News

Data Point
State Street (STT) said exchange-traded fund assets reached an all-time high in September, climbing to $695 billion under management. As of Sept. 30, there were 768 domestically traded ETFs, managed by 28 management companies. Inflows for the month climbed 5.1% to about $33 .6 billion.

Launching Pad
Exchange-traded-fund manager iShares has filed papers with the Securities and Exchange Commission to launch a pair of new bond ETFs. The prospectus for the iShares 10+ Year Credit Bond Fund said it will track the Bank of America Merrill Lynch 10+ Year U.S. Corporate & Yankees Index. The iShares 10+ Year Government/Credit Bond Fund will track the BofA Merrill Lynch 10+ Year U.S. Corporate & Government Index.

Next Week s Notebook

Earnings and Conference Calls

Monday
Charles Schwab, Fastenal, Oil-Dri Corporation of America

Tuesday
Audiovox, Bank of the Ozarks, CSX, Domino's, Exfo Electro-Optical Engineering, Intel, Johnson & Johnson, KMG Chemicals, NovaGold Resources, Posco

Wednesday
Abbott, AptarGroup, ASML Holdings, Commerce Bancshares, Crown Holdings, Datalink, HDFC Bank, Host Hotels & Resorts, JPMorgan Chase, Landstar System, Lufkin Industries, Medtox Scientific, Pure Bioscience, Spartan Stores, Stanley Furniture, Synergetics USA, W.W. Grainger, WD-40 Company, Westamerica Bancorporation, Xilinx, Zep

Thursday
Advanced Micro Devices, Amphenol, Baxter, Citigroup, Cubist Pharmaceuticals, Cypress Semiconductor, Cytec Industries, Fairchild Semiconductor International, Goldman Sachs, Google, Harley-Davidson, Home Bancshares, International Business Machines, Luby's, McClatchy, Mission West Properties, Navisite, Nokia , Omniture, People's United Financial, Polaris Industries, Polycom, PPG Industries, Safeway, Simmons First National, Southwest Airlines, Spartan Motors, Tempur Pedic International, Ultratech, Universal Forest Products, Valmont, Winnebago

Friday
A. O. Smith, Bank of America, First Horizon National, General Electric, Genuine Parts, Halliburton, Prosperity Bancshares, Sensient Technologies

Economic Data

Monday
No significant economic indicators

Tuesday
7:45 a.m. ICSC-Goldman Store Sales
8:55 a.m Redbook

Wednesday
7:00 a.m. MBA Purchase Applications
8:30 a.m. Retail Sales
8:300 a.m. Import and Export Prices
10:00 a.m. Business Inventories

Thursday
8:30 a.m. Consumer Price Index
8:30 a.m. Empire State Manufacturing Survey
8:30 a.m. Jobless Claims
10:00 a.m. Philadelphia Fed Survey
10:30 a.m. EIA Natural Gas Report
11:00 a.m. EIA Petroleum Status Report

Friday
9:00 a.m. Treasury International Capital
9:15 a.m. Industrial Production
9:55 a.m. Consumer Sentiment