- The Senate approved a $4 trillion budget measure Thursday by a 51-49 vote.
- Rising expectations of lower corporate taxes have helped stocks rise to record highs recently.
- JPMorgan Chase shares hit an all-time high.
- GE's stock rebounded sharply, erasing a 6.3 percent loss.
U.S. stocks closed higher on Friday after the Senate took a step toward achieving tax reform.
An incredible comeback in General Electric shares from a 6 percent deficit to positive also helped lift market benchmarks. Some investors bet the worst is over for the troubled conglomerate which reported abysmal earnings Friday morning and cut its forecast for the year.
The Dow Jones industrial average rose 165.59 points to 23,328.63, reaching intraday and closing records. Boeing and Goldman Sachs both rose about 2 percent to lead advancers. Shares of JPMorgan Chase, meanwhile, hit an all-time high after jumping 1.4 percent.
The also notched record highs, advancing 0.5 percent to close at 2,575.21 as financials led advancers by rising 1.2 percent.
PayPal was among the best-performing stocks in the index, rising 5.5 percent after the company reported better-than-expected quarterly results.
The Nasdaq composite gained 0.4 percent to 6,629.05 in a record-setting session.
The Dow, S&P and Nasdaq also posted weekly gains of 2 percent, 0.9 percent and 0.35 percent, respectively.
The Republican-led Senate approved a $4 trillion budget measure Thursday by a 51-49 vote. Passing a budget unlocks reconciliation, which enables the GOP to pass a tax bill with a simple 51-vote majority in the Senate. Using the tool removes the need for winning Democratic support, which would likely sink a GOP tax measure.
"The market was actually very excited about tax reform last year after the election. But come the first half of the year, those expectations dropped," said Rui De Figueiredo, CIO and co-head of the Solutions/Multi-Asset Group at Morgan Stanley Investment Management.
"Recently, expectations of tax cuts started to creep back in," he said. "The Republicans are so on the hook to get something done that those in-party divisions are likely to be resolvbed in order to get tax reform done."
The three major indexes had a banner week, posting record highs. The Dow also broke above 23,000 for the first time ever this week.
"We continue to set new highs and that does put people on edge at times," said Tom Anderson, chief investment officer at Boston Private.
"We've gone a long time without a 5 percent correction. But we continue to be bullish on stocks. We think this stock market is supported by fundamentals," Anderson said.
GE shares closed 1 percent higher after falling as much as 6.3 percent on the company's downbeat results. The stock posted its biggest one-day turnaround since 2009.
"It's a disgrace, what happened here," CNBC's Jim Cramer said Friday about GE's quarterly results. He also said, however, that new GE CEO John Flannery "is going to return it to a great American company."
Flannery said during GE's earnings conference call that its third-quarter results were "completely unacceptable." He also told CNBC's David Faber that everything is up for review to turn around the company.
Citi senior analyst Andrew Kaplowitz told CNBC's "Closing Bell" that "this is as bad as it gets" for GE. "As we look forward, people are going to say 'OK, 3Q was way worse but it could get better from here.'"
"I think this quarter there was a pretty big surprise in terms of earnings in [GE Power]. Power was worse than we thought," he said. "But the reality is that Flannery has talked about significant cost-cutting, and it starts with Power."
Celgene was the worst performer on the S&P 500, falling 10.8 percent after the company said it will discontinue trials on a drug aimed at treating Crohn's disease.
—CNBC's Jacob Pramuk, Alexandra Gibbs and Peter Schacknow contributed to this report.