* Q4 US GDP data misses estimate
* Microsoft up after strong results, boosts S&P, Nasdaq
* Xerox up after deal with Icahn to split into two
* Indexes up: Dow 1.87 pct, S&P 1.84 pct, Nasdaq 1.67 pct (Updates to afternoon)
By Noel Randewich
Jan 29 (Reuters) - Wall Street surged nearly 2 percent on Friday after the Bank of Japan unexpectedly cut interest rates and Microsoft led a strong rally in technology shares.
Stocks also got a boost from weak fourth-quarter U.S. GDP data, which bolstered arguments that the Federal Reserve might go slower than expected on future rate hikes.
While the Fed has not ruled out a rate hike in March, many investors believe recent global economic and financial turmoil may lead it to wait.
Japan’s central bank cut a benchmark rate below zero to stimulate its economy, a surprise move that boosted global equities.
Wall Street’s rally follows four weeks of volatility that has left the S&P 500 down 6 percent, in large part due to collapsing oil prices that have crippled energy companies and fed doubts about the health of the global economy.
“Sentiment certainly had swung to a wildly negative scenario. In the short term, I‘m not sure the sentiment backdrop we’ve seen was warranted,” said Michael Church, president of Addison Capital Management in Philadelphia.
“What happens if there is not a recession? What happens if China stabilizes and the Fed doesn’t raise rates aggressively?”
Microsoft jumped 5.6 percent on the software giant’s better-than-expected results.
The stock was the biggest influence on the S&P 500 and the Nasdaq and helped push the S&P tech sector up 3 percent, on track for its best session since October.
At 2:54 p.m., the Dow Jones industrial average was up 1.87 percent at 16,370.49 points and the S&P 500 had gained 1.84 percent to 1,928.28. The Nasdaq Composite added 1.67 percent to 4,581.73.
Amazon slumped 7.8 percent after its quarterly profit missed expectations.
Xerox gained 4.9 percent after announcing a deal with Carl Icahn to split itself into two.
Chevron’s shares edged down 0.2 percent after the oil major reported its first quarterly loss in more than 13 years.
U.S. crude rose 1.2 percent after trimming early gains on a report that Iran would not participate in a possible deal between OPEC and other producing countries to reduce output.
Advancing issues outnumbered decliners on the NYSE by 2,688 to 387. On the Nasdaq, 2,193 issues rose and 610 fell.
The S&P 500 index showed 15 new 52-week highs and seven new lows, while the Nasdaq recorded 25 new highs and 89 new lows. (Additional reporting by Abhiram Nandakumar in Bengaluru; Editing by Nick Zieminski)