The S&P 500 ended its best week in 2012 on Friday as investors returned to stocks after sources told Reuters that Spain was expected to request aid for its troubled banks.
The strong gains came after the benchmark S&P index fell more than 6 percent in May and dropped just below its 200-day moving average, signaling a technical bounce for equities.
The S&P financial index <.GSPF> rose 1.2 percent while the KBW bank index <.BKX> climbed 1.7 percent and shares of JPMorgan Chase advanced 2.7 percent to $33.68, all adding to gains just ahead of the close.
"What's driving the market here," said Robbert Van Batenburg, head of equity research at Louis Capital in New York, "is the belief we're in the final innings of approaching some form of a solution to contain the Spanish problem. I don't buy it, but maybe there's this understanding out there."
Gains were on light volume of 6.2 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq, compared with the year-to-date daily average of 6.85 billion shares.
European Union and German sources said euro-zone finance ministers were to hold a conference call on Saturday. Spain's expected request for aid was an effort to stem the tide of worsening market turmoil.
President Barack Obama said on Friday that European leaders face an "urgent need to act" to resolve the region's financial crisis as the threat of a renewed recession there spells dangers for an anemic U.S. recovery.
The Dow Jones industrial average <.DJI> gained 93.24 points, or 0.75 percent, to 12,554.20 at the close. The Standard & Poor's 500 Index <.SPX> rose 10.67 points, or 0.81 percent, to 1,325.66. The Nasdaq Composite Index <.IXIC> climbed 27.40 points, or 0.97 percent, to close at 2,858.42.
For the week, the Dow advanced 3.6 percent, the S&P 500 rose 3.7 percent and the Nasdaq jumped about 4 percent.
It was the best percentage weekly gain for all three indexes since December.
Underscoring the impact of Europe's debt crisis, McDonald's Corp reported a lower-than-expected rise in global same-store sales in May and warned austerity measures in Europe were taking a toll. Shares fell 0.7 percent to $87.75, causing the biggest drags on the Dow.
Shares of Facebook added 3 percent to $27.10. CNBC reported that Swiss bank UBS may have lost as much as $350 million from trading shares in Facebook amid the confusion of the social network's glitch-ridden debut on May 18. UBS was not immediately available for comment.
Though financials gained steam late in the session, telecommuncations was the day's best-performing S&P 500 sector. Verizon Communications Inc gained 1.9 percent to $42.44 and the S&P telecom sector index <.GSPL> rose 1.5 percent.
Among other individual companies, Chesapeake Energy Corp plans to sell its pipeline and related assets to Global Infrastructure Partners in three separate transactions worth more than $4 billion, as the company scrambles to plug an estimated $10 billion funding shortfall.
In addition, shareholders delivered a broad rebuke of the company's board, withholding support for two members up for re-election in the wake of a governance crisis and poor financial performance. Chesapeake shares gained 2.9 percent to $18.36.
Best Buy Co Inc founder and Chairman Richard Schulze resigned from the retailer's board on Thursday and said he was exploring options for his 20.1 percent ownership stake, a move seen as a possible precursor of a Schulze-led private takeover. The shares rose 2.3 percent to $19.98.
Advancers beat decliners on the NYSE by a ratio of about 7 to 3 and on the Nasdaq by about 2 to 1.
(Editing by Jan Paschal)