The S&P 500 and Nasdaq have finished at their highest levels in a month, with shares of JPMorgan Chase and other banks rising following their quarterly results, which kicked off the earnings season.
All three major indices also registered strong gains for the week, leaving the S&P 500 up 4.2 per cent so far in 2023, and the Cboe Volatility index - Wall Street's fear gauge - closed at a one-year low.
On Friday, financials were among sectors that gave the S&P 500 the most support.
JPMorgan Chase & Co and Bank of America Corp beat quarterly earnings estimates, while Wells Fargo & Co and Citigroup Inc fell short of quarterly profit estimates.
But shares of all four firms rose, along with the S&P 500 banks index, which ended up 1.6 per cent. JPMorgan shares climbed 2.5 per cent.
Still, Wall Street's biggest banks stockpiled more rainy-day funds to prepare for a possible recession and reported weak investment banking results while showing caution about forecasting income growth. They said higher rates helped to boost profits.
Strategists said investors would be watching for further guidance from company executives in the coming weeks.
"This has shifted the focus back to earnings," said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.
"Even though the earnings were basically OK, people are just kind of stepping back, and you're going to see a wait-and-see attitude with stocks" as investors hear more from company executives.
Year-over-year earnings from S&P 500 companies are expected to have declined 2.2 per cent for the quarter, according to Refinitiv data.
Also giving some support to the market, the University of Michigan's survey showed an improvement in US consumer sentiment, with the one-year inflation outlook falling in January to the lowest level since the spring of 2021.
The Dow Jones Industrial Average rose 112.64 points, or 0.33 per cent, to 34,302.61, the S&P 500 gained 15.92 points, or 0.40 per cent, to 3,999.09 and the Nasdaq Composite added 78.05 points, or 0.71 per cent, to 11,079.16.
The S&P 500 closed at its highest level since December 13, while the Nasdaq closed at its highest level since December 14.
For the week, the S&P 500 gained 2.7 per cent and the Dow rose two per cent. The Nasdaq increased 4.8 per cent in its biggest weekly percentage gain since Nov. 11.
The US stock market will be closed on Monday for the Martin Luther King Jr Day holiday.
Thursday's Consumer Price Index and other recent data have bolstered hopes that a sustained downward trend in inflation could give the Federal Reserve room to dial back on its interest rate hikes.
Among the day's decliners, Tesla shares fell 0.9 per cent after it slashed prices on its electric vehicles in the United States and Europe by as much as 20 per cent after missing 2022 deliveries estimates.
In other earnings news, UnitedHealth Group Inc shares rose after it beat Wall Street expectations for fourth-quarter profit but the stock ended down on the day.
Shares of Delta Air Lines Inc dropped 3.5 per cent as the company forecast first-quarter profit below expectations.