NEW YORK (AP) - Wall Street rebounded smartly yesterday, shooting higher as a surge in the dollar and another plunge in oil prices eased some of investors' worries about losses at mortgage finance company Fannie Mae. The Dow Jones industrials soared more than 300 points, more than wiping out a big loss from the previous session.

The session extended a streak of volatility on Wall Street that has seen triple-digit moves by the Dow become almost commonplace as investors react feverishly to any news about the financial sector, corporate earnings and the economy.

Yesterday, the dollar, which has sagged along with the economy, reached its highest level against the euro since February, and in the process sent a wave of confidence through the stock market. And because the dollar's strength has contributed to the recent skid in oil prices, light, sweet crude dropped sharply again, falling $4.82 a barrel to settle at $115.20 on the New York Mercantile Exchange. That brought crude's decline over the past four weeks to more than $30.

Investors see the drop in oil as a big boost for the economy, because it should allow consumers to spend more freely. For the moment, that has allowed the market to set aside nervousness about the financial sector, which is still contending with the fallout from the year-old credit crisis.

Fresh financial worries surfaced Friday after Fannie Mae, the largest US buyer and backer of home loans, reported a quarterly loss more than three larger than what Wall Street had expected and said it would slash its quarterly dividend to conserve cash.

Philip Dow, managing director of equity strategy at RBC Dain Rauscher in Minneapolis, said that while the strength in the dollar and the resulting drop in oil were attracting buyers yesterday, Wall Street's recent back-and-forth trading illustrates investors great anxiety.

"We live in a market where people react, they don't anticipate," he said. "So you've got this market that's kind on a seesaw every day reacting to news."

According to preliminary calculations, the Dow rose 302.89, or 2.65 percent, to 11,734.32.

The blue chips fell nearly 225 points on Thursday after concerns about the financial sector, a weak showing by retailers in July and a spike in weekly unemployment claims. But with yesterday's gains, the Dow rose 408 points, or 3.6 percent, for the week.

Broader indicators also rose sharply yesterday. The Standard & Poor's 500 index advanced 30.25, or 2.39 percent, to 1,296.32 and the Nasdaq composite index advanced 58.37, or 2.48 percent, to 2,414.1.

For the week, the S&P gained 2.9 percent, while the technology-heavy Nasdaq jumped 4.5 percent.

Bonds ticked lower as stocks jumped, easing demand for the safety of government debt. The yield on the benchmark 10-year Treasury note, which moves opposite its prices, rose to 3.94 percent from 3.93 percent late on Thursday. Gold prices fell.

The dollar's rise against the euro came after the European Central Bank (ECB) and the Bank of England separately left their benchmark interest rates unchanged on Thursday. With the ECB signaling more rate hikes are not likely, the euro wasn't as attractive as an investment option.

Kelli Hill, a portfolio manager at Ashfield Capital Partners in San Francisco, said a more robust dollar not only makes commodities like oil less expensive but can also offer a much-needed dose of faith in the US markets and economy.

"People want to sell on anything or buy on anything," she said, noting that light trading volume can exacerbate the market's gyrations. "Strengthening in the dollar is a good thing not only for business but also to build back confidence both domestically and internationally."

She is optimistic the markets will recover and said the rebound could come swiftly once the money sitting on the sidelines gets a sense that the economy is poised to turn higher.

In economic news, the Labour Department reported productivity grew at an annual rate of 2.2 percent in the second quarter. Economists surveyed by Thomson/IFR had predicted growth would come in at 2.7 percent compared with 2.6 percent in the first quarter. Still, some market watchers said any gains are positive.

Growth in unit labor costs slipped to a 1.3 percent pace in the second quarter, down from 2.5 percent in the first quarter. Wall Street hopes companies can keep a cap on worker pay to avoid a scenario of rising prices and weakening economic growth.