By Caroline Valetkevitch

NEW YORK (Reuters) – Oil prices rallied on Friday following the sharpest weekly drop in U.S. oil rig count in nearly 30 years, while the dollar index ended January with its longest run of gains since the greenback was floated in 1971.

U.S. stocks finished the day down more than 1 percent as data showed U.S. economic growth slowed sharply in the fourth quarter.

Major U.S. stock indexes posted losses for the week and month, with the declines driven by falling oil prices and concern about weak overseas demand. The S&P 500 was down 3.1 percent for January, its biggest monthly slide since January 2014.

In a rally that may spur speculation that a seven-month price collapse has ended, U.S. crude futures <CLc1> jumped 8.3 percent to settle at $ 48.24 a barrel and Brent crude <LCc1> shot up 7.9 percent to settle at $ 52.99, its biggest one-day gain since 2009. Sparking the rally was data that showed drillers were cutting back on shale activity.

European stocks ended lower, but registered their biggest monthly gain in three years.

The U.S. dollar index <.DXY> advanced for a seventh straight month in January, marking the longest streak of monthly gains since the greenback was floated in 1971. It was up 5.0 percent for January, but off 0.1 percent for the day.

Weighing on stocks and the dollar, U.S. gross domestic product expanded at a weaker-than-expected 2.6 percent annual pace after the third quarter’s spectacular 5 percent rate, the Commerce Department said in its first snapshot of fourth-quarter GDP.

The headline number was “well below consensus expectations and that is definitely one of the data points that many bulls were looking for to justify staying bullish,” said Peter Kenny, chief market strategist at Clearpool Group in New York.

For the day, the Dow Jones industrial average <.DJI> fell 251.9 points, or 1.45 percent, to 17,164.95, the S&P 500 <.SPX> lost 26.26 points, or 1.3 percent, to 1,994.99 and the Nasdaq Composite <.IXIC> dropped 48.17 points, or 1.03 percent, to 4,635.24.

The FTSEurofirst 300 <.FTEU3> index of top European shares ended down 0.6 percent for the day, but rose 7.1 percent in January, its biggest monthly gain in three years.

The MSCI all-country world index <.MIWD00000PUS> dropped 1 percent.

European shares have been lifted recently by expectations that a bond-buying program by the European Central Bank will help the region’s economic recovery.

U.S. Treasury debt prices jumped, with long-term yields hitting record lows after the slower-than-anticipated economic growth fueled speculation the Fed will delay interest rate hikes.

The late surge in oil prices curbed Friday’s gains, but the month’s rally still put the 30-year Treasury <US30YT=RR> on track for total returns in January of more than 10 percent. That would be the long bond’s best total return performance since September 2011, according to Bank of America Merrill Lynch data

Russia surprised markets by cutting interest rates as fears of a Russian recession mount following a plunge in global oil prices and Western sanctions over the Ukraine crisis.

Adding to concerns for some investors, Greece’s finance minister said the government would not cooperate with the European Union and International Monetary Fund mission bankrolling the country and would not seek an extension to the bailout program.

(Additional reporting by Rodrigo Campos in New York; Editing by Janet Lawrence, Susan Fenton, Meredith Mazzilli, and Chizu Nomiyama)