The Dow and S&P 500 carved out new record highs, cl;osing sharply higher on the week, after stocks rallied sharply later in the week following strong retail sales data and continued mergers and acquisitions activity.
As of midday Friday, The Dow Jones Industrial Average had posted a weekly gain of about 2%, the S&P 500 was up about 1.6% and the Nasdaq Composite 1.3%.
Stocks closed higher on Monday but gains were held in check as investors awaited the start of the second-quarter earnings season.
"We're getting into earnings season, and what we've seen so far is good, so we think there is going to be an upward bias," said Joe Ranieri, head of NASDAQ trading at Canaccord Adams. "It's good but scary."
Stocks closed Tuesday lower and the Dow fell 148 points as investors were spooked by an earnings warning from retailer Home Depot.
Shares of Sears Holdings plunged 10% after the retailer cut earnings guidance for the second quarter and reported a 4% decline in same-store sales for the first nine weeks of the current fiscal quarter. The company said a weak housing market has created a decline in sales of appliances.
Homebuilder D.R. Horton said orders for new homes fell 40% last quarter and that it would write down assets leading to a third quarter loss.
The markets saw volatile trading on Wednesday due to subprime mortgage concerns but closed with modest gains following Tuesday's selloff.
Weak sales of mobile devices in Europe and Asia prompted Motorola to reduce its quarterly guidance on Wednesday after the close of trading.
Stocks traded sharply higher on Thursday and the Dow and S&P 500 smashed previous records as investors cheered strong monthly sales reports from major retailers such as Wal-Mart Stores and Nordstrom.
The blue chip Dow traded above 13,800 for the first time and closed Thursday with a huge gain of more than 280 points, the biggest one-day gain on a points basis since October 2002.
Apparel retailers such as J.C. Penney and Abercrombie & Fitch also saw shares rise after reporting robust monthly sales data.
"Everyone was so pessimistic on the retailers and retail comps came in better than expected," said Frederic Dickson, chief market strategist at D.A. Davidson. "It was just what the market needed to hear."
Thursday's gains were across the board and all ten economic sectors tracked by S&P traded higher, led by a whopping 2.7% gain for basic materials.
The group was boosted by further industry consolidation as Rio Tinto said it would acquire aluminum giant Alcan for $38 billion in cash. Canada's Alcan accepted the British mining giant's $38 billion bid, which topped a previous bid from Alcan rival Alcoa.
General Electricreported quarterly results, saying second-quarter net income rose to $5.42 billion, or 53 cents per share, from $4.95 billion, or 48 cents a share, a year earlier, in line with expecations. GE, the parent company of CNBC, also said it would shed its mortgage unit.
Stocks Friday continued their record run, despite disappointing retail sales data and higher crude oil prices. The Dow moved closer to 14,000 while the S&P 500 finally surpassed its record intra-day high set in 2000.