US stocks surged in the last trading hour yesterday as investors hunted for bargain a day after Wall Street's worst session since the 1987 crash.

Stocks were traded lower earlier in the day after the Federal Reserve said industrial production fell in September by the most in nearly 34 years, as an aircraft strike and the credit crunch weakened manufacturing.

Moreover, the Philadelphia Federal Reserve said regional manufacturing conditions weakened in October. The bank's regional index came in at a negative 37.5 compared with a positive 3.8 for September.

Worse-than-expected manufacturing data spurred concern that the US economic slump is worsening. Dow Jones tumbled over 300 points.

The US Labor Department reported that Consumer Prices Index was flat in September, thanks to declining energy and car costs, which briefly boosted the market in early trading. The reading dipped 0.1 percent in August. Meanwhile, the core index, which excludes food and energy prices, rose 0.1 percent. Economists had forecast that CPI would rise to 0.1 percent and core CPI would increase 0.2 percent.

The US Labor Department also posted claims for unemployment benefits fell 16,000 last week to 475,000. The decline is bigger than anticipated.

The Dow Jones industrial average was up 401.35 points, or 4.68 percent, at 8,979.26. The Standard & Poor's 500 Index gained 38.59points, or 4.25 percent, at 946.43. The Nasdaq Composite Index climbed 89.38 points, or 5.49 percent, at 1,717.71.