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Stocks Log Best Weekly Gain in 8 Weeks

Stocks finished higher in a volatile session Friday after after Bernanke's speech raised hopes that the Fed may consider further stimulus measures to boost the economy during an extended policy meeting next month.

The major indexes snapped a four-week losing streak and logged its best week in eight.

The Dow Jones Industrial Average rallied 134.72 points, or 1.21 percent, to finish at 11,284.54. The Dow plunged almost 220 points in a knee-jerk reaction immediately after Bernanke started his speech, but quickly pared their losses.

The S&P 500 gained 17.53 points, or 1.51 percent, to end at 1,176.80. The Nasdaq climbed 60.22 points, or 2.49 percent, to close at 2,479.85.

The CBOE Volatility Index, widely considered the best gauge of fear in the market, finished below 36.

For the week, the Dow jumped 4.32 percent, the S&P surged 4.74 percent, while the Nasdaq soared 5.89 percent. Bank of America was the biggest gainer on the blue-chip index for the week, while Travelers was the only decliner.

All 10 S&P sectors were positive for the week, led by techs, while utilities gained the least.

Federal Reserve Chairman Ben Bernanke said the Fed is ready to use additional toolsto help the economy, but he stopped short of talk of another round of monetary easing. Bernanke said the Fed will meet for an extra day in September to discuss its options to provide additional monetary stimulus, among other topics.

While Bernanke expects growth to pick up in the second half of the year, if signs of a recovery fail to materialize in the near-term, the FOMC may consider additional policy tools at its September meeting.

“[Bernanke] outsmarted Wall Street,” said Todd Schoenberger, managing director of LandColt Trading. “His speech was plain vanilla and his plan was not to have a plan … He basically gave us a carrot so that we can hold our breath for the next month.”

This time last year, Bernanke laid the groundwork for the Fed's $600 billion bond-buying program to revive the economy, also known as QE2.

“I like that [the Fed] stood tall and didn’t give into the financial panic,” James Paulsen, chief investment strategist at Wells Capital Management told CNBC. “If they had acted, it would have been a sign that the Fed is nervous and it would have scared investors,” Paulsen added. “So I’m optimistic that this is a good outcome.”

ECB President Jean Claude Trichet is expected to speak at Jackson Hole Saturday and some are expecting him to signal a more dovish position on rates.

Meanwhile, property insurers such as Travelers and Allstate eked out a gain as worries over Hurricane Irene pressured the sector.

New York City ordered the evacuation of more than 250,000 peopleand prepared to shut down its entire mass transit system ahead of Hurricane Irene's expected arrival over the weekend.

While the New York Stock Exchange plans to be open for trading as usual next Monday, a final decision will not be issued until Saturday or Sunday.

On the tech front, Apple gained to retrace all of their previous session’s losses following news that Steve Jobs resigned from his CEO post.

Research In Motion rallied after Stern Agee upgraded the BlackBerry maker to “buy” from “neutral.”

And Qualcomm advanced after Goldman Sachs reiterated its "conviction buy list" rating on the tech giant following a meeting with the company's executives.

Bank of America gained following news that the bank plans to sell at least half of its 10 percent stakein China Construction Bank, CNBC learned from sources.

The news comes a day after Warren Buffett's Berkshire Hathaway said it will invest $5 billion in BofA. At least two brokerages cut their price targets on the firm. (Read More: What These Four Stocks Have in Common With BofA)

Tiffany jumped to lead the S&P gainers after the luxury retailer raised its full-year profit outlook, helped by international sales.

On the economic front, the economy grew much slower than expectedin the second quarter as GDP rose at an annual rate of 1 percent.

“In light of the environment we’ve been dealing with over the last few months, the whisper number suggested that the GDP figure could have been negative,” Phil Orlando, Chief Equity Market Strategist at Federated Investors. “So it was a moral victory that we had a positive number.”

Meanwhile, consumer sentiment edged up from its mid-August level but was still near recession-era lows.

Volume was lighter than usual with the consolidated tape of the NYSE at 4.16 billion shares, while 1.12 billion shares changed hands on the floor.

European shares ended lower, but managed to eke out a small gain for the week to break a four-week losing streak. Banks and insurers, particularly those not covered by the region's short-selling ban, were the hardest hit.

—Follow JeeYeon Park on Twitter: twitter.com/JeeYeonParkCNBC

On Tap Next Week:

MONDAY: Personal income and spending, pending home sales index, Dallas Fed Mfg survey
TUESDAY: S&P Case-Shiller home price index, consumer confidence, Fed's Kocherlakota speaks, FOMC minutes
WEDNESDAY: Weekly mortgage apps, Challenger job-cut report, ADP employment report, Chicago PMI, factory orders, oil inventories, USDA's agricultural trade outlook
THURSDAY: Weekly jobless claims, productivity and costs, ISM Mfg index, construction spending, chain store sales, auto sales
FRIDAY: Non-farm payroll

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