The Dow scored its second record close in a row and the Nasdaq had its best week in four months as buyers snapped up oil, financial and technology stocks ahead of next week's earnings reports.
The Dow Jones Industrial Average posted its 24th record close since October, while the Nasdaq and the S&P 500 were at six-year highs.
For the week, the Dow finished up 1.27%, while the Nasdaq Composite rose 2.82% and the S&P 500 increased 1.49%.
Among the biggest gainers for the week were airlines, brokers, retailers and biotech. The biggest losers wer energy companies.
Next week, investors will digest a slew of earnings reports from sectors that have recently shown strength in the markets.
Tech companies reporting include Intel and Apple; financial companies include JP Morgan Chase, Merrill Lynch and Citigroup; and airline companies include Continental, Southwest Airlines and AMR Corp., the parent company of American Airlines.
"I've Been Impressed"
"I've been impressed overall with the market action," Gail Dudack, Managing Partner at Dudack Research Group, told cnbc.com. "We've had this seemingly never ending stream of double-digit earnings gains, but I think it will continue with low double-digit growth in the fourth quarter and that's pretty amazing."
The beaten down energy sector rose on speculation that OPEC may further cut oil production to bolster prices. Investors also put money into technology stocks. Shares of Hewlett-Packard hit their highest price in more than six years.
"They're buying ahead of the earnings next week, which is where we're focused," one trader told cnbc.com. "We're seeing buying in the financials and the tech sector."
Intel , which reports next week, was also trading higher. Other major tech winners included Cisco , Google and Microsoft.
Gains in financial stocks were also helping to boost the markets with shares of Goldman Sachs , Morgan Stanley , Merrill Lynch and Lehman Brothers all trading higher.
Oil Moves Higher
Oil rose more than a dollar on speculation that OPEC may consider holding an emergency meeting January 21st and 22nd to react to the recent plunge in crude.
New York light crude futures also rose on forecasts of colder weather in the Northeastern section of the U.S., as well as sentiment that the oil market is oversold.
"I think what you are seeing is a pause in the selling (of oil)," Mike Fitzpatrick, Vice President, Energy Risk Management, at Fimat, told CNBC.com. "Most of the easy money has been made on the short selling and I think people are just positioning themselves ahead of the holiday weekend."
Shares of major oil companies, including Exxon Mobil , BP and Conoco Phillips , rose on the possibility of more crude oil production cuts. BP was also boosted by an announcement that Lord John Browne would be stepping down as CEO in late July, more than a year earlier than planned.
Not all tech stocks were participating in the rally.
No. 2 chip maker AMD tumbled after the company said lower microprocessor selling prices would cut into fourth-quarter profit.
Also in the tech sector, federal investigators are actively investigating a backdated grant of stock options to Apple CEO Steve Jobs that had a false October 2001 date, The Wall Street Journal reported. Apple shares are also lower.
The Dolan family, which owns controlling interest in Cablevision , has raised its bid to take the company private. The family raised its offer to $30 a share from $27, calling the bid its "best and final offer."
Retail sales rose 0.9% in December, better than expected, suggesting consumer spending remains strong. Economists predicted that retail sales would rise 0.7%. Sales ex-autos increased 1.0%.
The better than expected number and other strong data prompted economists at Goldman Sachs and Lehman to raise their forecasts for fourth quarter GDP growth to 3.3 % from 2%. Treasury prices were lower as rates moved higher on the strong economic news.
The price of imported goods into the U.S. also increased more than expected, up 1.1% in December. The rise was led by increases in the price of imported oil and natural gas.
Europe Closes Higher, Tokyo Ends Losing Streak
European stocks managed to close at new six-year highs after choppy trading amid mixed corporate earnings.
Frankfurt's DAX London's FTSE-100 and the Paris CAC-40 all finished higher. Carrefour, the world's second-largest retailer, said fourth-quarter sales rose at a slower-than-expected pace, blaming tough competition.
The Nikkei 225 Average finished the week higher, snapping a two-day losing streak as technology firms such as Kyocera gained after the yen hit its lowest in more than a year against the U.S. dollar.
Australia's A&P/ASX 200 ended higher with Lend Lease closing up after winning a British defense contract and Bendigo Mining jumped after St Barbara bought a 10% stake.
Hong Kong's Hang Seng Index finished higher, with China plays gaining as telecoms and financial stocks lead the way after days of sharp declines.