After a two-week slide, stocks made a comeback this week as a series of events revitalized hopes for the recovery and the earnings season got off to a solid start.
In Friday's action, the Dow Jones Industrial Average gained 78.07, or 0.8 percent, to close at 9,864.94 — a new high for the year. The S&P 500 rose 0.5 percent and the Nasdaq advanced 0.7 percent.
For the week, the Dow jumped 4 percent, while the S&P and Nasdaq gained 4.5 percent.
The CBOE Volatility Index, widely considered the best gauge of fear in the market, dropped 20 percent, ending the week at 23.09.
Monday is the Columbus Day holiday in the U.S. but all financial markets will be open.
In Friday's trading, stocks recovered after a quick dip at the open, though gains were modest. Chevron advanced after saying it expects profits to improve in the third quarter. And techs got a boost from some upbeat analyst comments.
The opening dip was a result of the dollar's strength after comments from Fed Chairman Ben Bernanke.
Bernanke said the Fed will eventually have to start tightening its monetary policyas the economy heals.
"Accommodative policies will likely be warranted for an extended period," Bernanke said in remarks prepared for delivery at a monetary policy conference at the Fed. "At some point, however, as economic recovery takes hold, we will need to tighten monetary policy to prevent the emergence of an inflation problem down the road."
The dollar retreated against major curriences. Both gold and oil also pulled back. Oil finished the week at $71.77 a barrel. Gold finished at $1,048.60 an ounce, after setting an intraday high earlier in the week above $1,062.
Earlier this week, Australia raised its interest rates, the first major economy to do so since the financial crisis began.
That, coupled with a report from the ISM that the manufacturing sector expanded for the first time in a year, got stocks off on the right foot this week.
Fueling the rally, retailers reported a better-than-expected September and Alcoa kicked off earnings season with a better-than-expected report.
Pros say the market's direction is all going to hinge on earnings season and this quarter, it comes down to one word: Revenue.
That's exactly what Alcoa delivered: It beat on both earnings and revenue.
Chevron added to the earnings optimism: The oil giant said it expects third-quarter earnings to be significantly higherthan the second quarter, helped by higher crude prices and gains from asset sales.
Earnings season will kick into high gear next week, with results from JPMorgan, Citigroup, Bank of America, Goldman Sachs and CNBC's parent, GE.