Stocks ended broadly higher after new economic data raised hopes of a Fed rate cut, and investors were quick to jump back into the market following recent declines.
"I'm not surprised to see the market snap back," said Alec Young, market strategist at S&P Equity Research. "The market was kind of overbought -- it was an excellent opportunity for a shakeout."
Core inflation as measured by the producer price index, or PPI, came in unchanged, which may allow the Fed greater flexibility in terms of interest rate policy.
"A Fed-friendly PPI number conceivably opens the door to let them ease," said Young.
The Dow Jones Industrial Average rebounded from Thursday's decline of almost 150 points, ending the week flat. The Nasdaq closed up 1.1% on a strong performance from chip-related stocks, while the S&P 500 moved solidly above 1500 after dipping below that psychological threshold yesterday.
The Dow and the S&P 500 ended flat for the week but the Nasdaq closed with a weekly decline for the first time in four weeks. Stocks bounced back from the largest one-day decline in the major market indexes since early March.
"Yesterday was a classic opportunity for shrewd investors to take advantage of momentary weakness in the market," said Peter Kenny, managing director at Knight Equity Markets. "I think all of the block and tackle pieces are in place for the market to continue to move upwards."
Buying took place across the board, with all of the S&P 500 sectors trading firmly in positive territory. Energy led sector leaders, while tech stocks and the financial sector also saw strong gains.
Nvidia shares jumped 7% after the company topped first-quarter consensus forecasts. The graphics chipmaker reported earnings of 42 cents a share, compared with Wall Street's estimate of 39 cents. Nvidia also boosted its long-term profit margin outlook.
American International Group saw modest gains after reporting quarterly results above Wall Street estimates on Thursday after the close of trading.
The Chicago Mercantile Exchange boosted its bid for crosstown rival Chicago Board of Trade after the cash-and-stock proposal from InterContinental Exchange increased in value due to recent gains in ICE shares. Shares of both CME and CBOT Holdings moved higher.
Biotech heavyweight Amgen added further declines after an FDA advisory panel recommended further restrictions on top-selling anemia drugs marketed by Amgen and Johnson & Johnson . Research firms Citigroup, J.P. Morgan, Lazard Capital and Morgan Stanley all downgraded the stock.
New York light sweet crude futures closed up 0.9% to $62.37, ending the week with a modest gain, as energy traders remained concerned over potential supply disruptions from African producers.
Retail stocks were weak after monthly sales data came in below expectations. April sales declined 0.2%, compared with economists' forecast of a rise of 0.3%. Shares of discount giant Wal-Mart Stores and other retailers moved lower.
The producer price index (PPI) rose 0.7% in April while the closely watched core rate came in unchanged. Analysts surveyed by CNBC and Dow Jones expected the PPI to show an increase of 0.6% and the core rate to rise as well by 0.2%.
Treasury prices rose, sending yields lower.
European Stocks Close Higher, Asia Ends Mostly Lower
European stocks reversed earlier declines to end higher as Britain's FTSE-100, France's CAC-40 and Germany's DAX all closed in positive territory.
France's state-owned utility EdF denied reports it approached German utility RWE about a potential takeover. German radio broadcaster SWR reported the companies were in talks to merge.
Italian oil outfit Eni reported quarterly results above analysts' forecasts, despite a 9.3% drop in first-quarter earnings.
Asian stocks closed largely lower following Thursday's disappointing U.S. retail sales data.
Japan's Nikkei 225 Average closed down 1%. Shares of Casio tumbled on a downbeat forecast and broker downgrades. Meanwhile, investors sold high-tech exporters such as Sony on growing concerns regarding the U.S. economic outlook. Yokogawa Electric and Konica Minolta were also major drag following disappointing earnings reports.
Korea was the region's lone bright spot as the benchmark Kospi index rallied off lows to close at a new record. Shares of Hyundai Steel surged after the company said it signed a contract to secure iron ore.
The high-flying S&P/ASX 200 Index finished down in Australia as renewed worries about the health of the world's biggest economy pressured U.S.-exposed firms such as Westfield Group.