U.S. stocks rallied Friday amid mounting hopes for another Federal Reserve interest-rate cut and a sense that the intense sell-off in recent days had gone too far.

DJ INDUSTRIALS

On Thursday, the index came back from a 274.20-point loss to close 9.78 points lower.

There’s a good chance that Thursday’s action might have been the low for the market, said Courtney Smith, chief investment officer at Orbitex Management Inc.

We’ve suffered the bulk of the shock waves that we’re going to have to suffer, said Paul Rabbitt, president of Rabbitt Analytics. The prevailing negative here is the impeachment process, which will dampen people’s enthusiasm for just about anything.

On the week, the Dow added 114.83 points, or 1.5 percent.

On the year, the Dow is down 8.73 points, or 0.1 percent, following gains of 33 percent, 26 percent, and 22 percent, in 1995, 1996, and 1997, respectively.

Next week, reports on retail sales, industrial production, and wholesale and retail price inflation are on the economic calendar.

The chief focus, however, will be on the unofficial launch of corporate America’s third-quarter earnings reporting season. In particular, investors will watch to see what corporate officials have to say about the outlook for the fourth quarter and 1999.

On Friday, speculation ran rampant that the Federal Reserve will engage in another cut of short-term interest rates before its next policy meeting Nov. 17.

The central bank lowered the federal funds rate target for the first time in nearly three years on Sept. 29. The funds rate is the rate banks charge each other for overnight loans.

We have to deal with the Oct. 31, 1988, closing fiscal year for tax selling purposes for mutual funds, Rabbitt said. Most funds have taken a tremendous amount of short-term capital gains in the roaring bull market of the first quarter of 1998. It would not be very wise for them, given that heir net asset values are down substantially, to deliver capital gains tax ramifications.

So there’s a very strong motivation for funds to match up their first-quarter gains with losses this month, he said. That puts pressure on the market for the next couple of weeks. I’m hoping that that will be enough and we won’t suffer any further fundamental shockwaves. And if that’s the case, I think the low on the market is probably Dow 7,100.

In the currency market, the U.S. dollar, after being subjected to its worst loss in 25 years Wednesday, headed lower.

In the bond market, massive hedge fund liquidation slammed prices for major setbacks. The 30-year Treasury declined 1 29/32, to yield 5.125 percent.

The stronger yen helped Asian markets. Hong Kong’s Hang Seng stock index surged 7.2 percent, South Korea’s Seoul Composite stock index soared 7.5 percent, and Indonesia’s Jakarta Composite stock index jumped 5.7 percent.

In Friday’s market indicators:

• The Standard & Poor’s 500 Index rose 2.6 percent.

Among the stocks in the news Friday:

• Healthcare products and services provider Allegiance (AEH) sprinted 9 7/16, or 41 percent, to 32 7/16. Drug and hospital supplies distributor Cardinal Health (CAH) will purchase Allegiance for $5.4 billion in stock. Cardinal shares slumped 8 11/16 to 84.