“Following his speech, there was some initial disappointment that the Fed didn’t announce any new stimulus plans, but the fact that the Fed remains open has probably provided a floor for markets,” said Michael Sheldon, chief market strategist at RDM Financial Group. “And investors are slightly more optimistic today based on comments coming from Europe.”
Spain's government approved a banking reform as the debt-ridden nation looks to accelerate the clean up the troubled sector.
European shares finished higher, reversing a three-day decline, amid optimism the ECB will announce a new program of bond buying next week. (Read More: Weidmann Resignation? Better Not Hope for It!)
Investors will be looking ahead to the ECB meeting next Thursday to see whether the central bank will discuss purchasing sovereign debt, following Draghi's comment that he would do whatever it takesto defend the euro.
“This particular rally this morning was about what’s going on in Europe,” said Art Cashin, director of floor operations at UBS Financial Services. “The ECB may have come close to cobbling together a minor rescue mission… we had one of the ECB members saying they’re close to a sovereign buyback bond program and Weidmann’s getting ready to resign.”
Rumors swirled earlier this morning that Bundesbank chief Jens Weidmann, one of the most strident holdouts against a potential ECB bond-buying plan, considered resigning several times, according to a German newspaper. But a Bundesbank source dismissed the rumor after the European market close.
Facebook tumbled to a new all-time low after BMO Capital Markets and BofA Merrill Lynch cut their price targets on the social-networking giant to $15 from $25, and to $12 from $23, respectively. Shares have plunged more than 50 percent since its market debut in May. Game publisher Zynga , which gets most of its revenue from Facebook, also dropped.
JPMorgan said it plans to reduce some services to clients and cut ties with others as the banking giant looks to lower clearing and settlement risks, according to the Wall Street Journal.
Among earnings, Splunk surged after the data analytics software maker posted quarterly results and outlook that topped expectations.
Meanwhile, Zumiez plunged after the apparel retailer forecast current-quarter profit below estimates.
On the economic front, consumer sentiment rose to a three-month highand factory orders posted the biggest gain in one year. Meanwhile, manufacturing activity in the Midwest was slightly lower than expected in August.
The stock market will be closed next Monday for Labor Day.
—By CNBC’s JeeYeon Park (Follow JeeYeon on Twitter: @JeeYeonParkCNBC)
On Tap Next Week:
MONDAY: Labor Day—Markets Closed
TUESDAY: ISM mfg index, construction spending, Democratic National Convention, auto sales; Earnings from Campbell Soup, Smithfield Foods, Teavana
WEDNESDAY: Weekly mortgage apps, productivity & costs, Microsoft/Nokia to unveil Windows 8 handset, Verizon/Motorola to unveil Droid RAZR; Earnings froM Dollar General, H&R Block, Verifond
THURSDAY: Challenger job-cut report, ADP employment report, jobless claims, ISM non-mfg index, quarterly services survey, oil inventories, NY fashion week starts, Amazon.com press conference; Earnings from Hovnanian
FRIDAY: Gov't jobs report; Earnings from Kroger, Lululemon
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