* End of Russian military drills near Ukraine border lifts
* S&P gains, posts best day since March 4
* Indexes up: Dow 1.1 pct, S&P 1.1 pct, Nasdaq 0.8 pct
* Shares of defense companies up
(Adds Raytheon, Northrup Grumman, Lockheed)
By Akane Otani
NEW YORK, Aug 8 The S&P and Dow both posted
their best day since March on Friday, with the market buoyed by
news that Russia was ending military drills near the Ukrainian
border, while investors overlooked U.S. air strikes in Iraq.
The gains helped major averages erase the week's losses as
buying intensified as the day came to a close. The CBOE market
volatility index fell 5.7 percent to 15.71 in a sign of
reduced investor uncertainty.
Stocks have been under pressure of late as investors,
worried about high valuations and uncertainty around the world,
pulled back from riskier assets. Before Friday's rally, the S&P
500 had given up more than 4 percent while the small-cap Russell
was down 7 percent over the past four weeks.
Markets rallied after Russia's Defense Ministry said Friday
it had finished military exercises in southern Russia, which the
United States had criticized as a provocative step amid the
"The market hates uncertainty, and when it doesn't have
enough information about how badly an event could impact the
economy, it tends to take the worst-case scenario and people
sell off," said Malcolm Polley, president and chief investment
officer of Stewart Capital Advisors in Indiana, Pennsylvania.
"With the news of the de-escalating in Russia, and also with
the administration saying exactly what they are doing in Iraq,
it's helped clear up some uncertainty in the market."
Earlier on Friday, the United States carried out air strikes
targeting Islamic State fighters marching on Iraq's Kurdish
capital. The strikes were the first authorized on Iraq since
President Barack Obama pulled American troops out in 2011.
The Dow Jones industrial average rose 182.52 points,
or 1.12 percent, to 16,550.79. The S&P 500 ended up 21.84
points, or 1.14 percent, to 1,931.41. The Nasdaq Composite
added 36.02 points, or 0.83 percent, to 4,370.99.
For the week, the Dow rose 0.4 percent, the S&P 500 gained
0.3 percent, and the Nasdaq rose 0.4 percent.
Utilities were the day's biggest gainer among S&P sectors,
rising 2 percent, followed by a 1.7 percent increase in energy
Shares of defense companies also performed well, with
Lockheed Martin Corp ending the day up 1.8 percent to
$165.80, Raytheon Co up 2.4 percent to $91.61 and
Northrop Grumman Corp up 2.1 percent to $122.86.
U.S.-traded shares of Tekmira Pharmaceuticals Corp
surged 45.1 percent to $20.70 after the U.S. Food and Drug
Administration cleared the company's experimental Ebola
treatment for potential use in humans. More than 28.4 million
shares changed hands, the busiest day of trading in company
About 5.5 billion shares traded on all U.S. platforms,
according to BATS exchange data, compared with the five-day
average of 6.5 billion.
(Editing by Bernadette Baum, Leslie Adler and Lias Shumaker)