Wall Street staged a dramatic turnaround Friday, shooting higher in the last half-hour of trading after word that a bailout plan for troubled...

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NEW YORK — Wall Street staged a dramatic turnaround Friday, shooting higher in the last half-hour of trading after word that a bailout plan for troubled bond insurer Ambac Financial could be announced next week.

The Dow Jones industrial average rose 96.72 to 12,381.02.

Microsoft, one of the 30 Dow stocks, shed 42 cents to close at $27.68 a share. Boeing, also a Dow stock, gained $1.03 to $83.04.

Broader stock indicators also moved higher. The Standard & Poor’s 500 index rose 10.58 to 1,353.11, and the Nasdaq composite index rose 3.57 to 2,303.35.

CNBC reported shortly before the closing bell that a plan to help shore up the finances of Ambac Financial Group could be announced Monday or Tuesday. Ambac shares jumped on the report and finished up $1.48, or 16 percent, at $10.71.

The market’s turnaround came after nearly two days of selling. The Dow had been down more than 100 points, but by the close, showed a 225-point reversal from its lows of the session.

“There’s probably some validity to the rumors,” said Jim Herrick, manager of equity trading at Baird, referring to traders’ speculation about Ambac. “With the overall financial crunch we’ve experienced, this brings new confidence in the sector.”

The market’s decline Friday morning followed a sell-off Thursday that left the Dow down more than 140 points, or 1.2 percent. Investors worried about a weaker-than-expected reading on regional manufacturing from the Federal Reserve Bank of Philadelphia as well as another drop in the Conference Board’s monthly index of leading economic indicators.

“I think what really still seems to be dragging the market down are some of those manufacturing numbers,” said Ryan Detrick, strategist at Schaeffer’s Investment Research in Cincinnati, referring to the Philadelphia Fed report as well as regional manufacturing findings from the New York Fed last week. “It just shows that the fears that the U.S. economy is in recession are continuing to dominate.”

The day’s late reversal appeared to ease some of Wall Street’s concerns about the prospects for the financial sector and the overall economy after a stream of mostly weak economic readings. The downbeat economic readings in recent weeks have raised questions about whether the Federal Reserve will be able to fend off a recession. There have been fears the U.S. may be entering a period of stagflation — when stalling growth accompanies rising prices — for the first time since the 1970s.