The Dow Jones industrial average jumped nearly 200 points, its first gain in three days. The market has now had its longest winning streak since an eight-week run ending in late April that pushed stocks to their highest levels of the year.
A surprise jump in durable goods orders and corporate spending provided the boost to U.S. stocks, as did a strong earnings report from Nike Inc. and an increase in new home sales last month.
Gold prices climbed to another record, briefly touching $1,300 an ounce, as many investors remained cautious. The dollar and Treasury prices fell.
Industrial stocks including General Electric Co., Caterpillar Inc. and United Technologies Corp. gained after the Commerce Department reported that orders for durable goods excluding transportation rose last month at their fastest pace in five months, while corporate spending also rose.
Stocks have been volatile in recent days as investors react to the latest economic reports. Much of the economic news throughout September has been better than expected, pushing indexes sharply higher during the month after a big sell-off in August.
Zahid Siddique, an associate portfolio manager at Gabelli Equity Trust Inc., said traders are only reacting to the latest news because there still isn't certainty about the pace of recovery.
"Based on the daily data they get, they move the market one way or another," Siddique said.
The Dow Jones industrial average rose 197.84, or 1.9 percent, to close at 10,860.26. The Dow has risen 8.4 percent in September, but is only up 4.1 percent for the year and is still 3.1 percent below its 2010 high reached on April 26. The Dow is on track for its best performance for September, which is usually a weak month for stocks, since 1939.
The Standard & Poor's 500 index rose 23.84, or 2.1 percent, to 1,148.67, ending a three-day losing streak. The index, a commonly used benchmark for professional investors, also climbed back above a key technical trading level Friday.
The Nasdaq composite index rose 54.14, or 2.3 percent, to 2,381.22. The technology-focused index has been the best performer during this month's rally, jumping 12.6 percent.
For the week, the Dow is up 2.4 percent, the S&P 2.1 percent, the Nasdaq 2.8 percent.
One simple explanation for this month's surge is that many people were keeping money in cash at the start of September and didn't want to miss out on the rally once it got going, said Cleve Rueckert, an equity strategist at Birinyi Associates, a money management and research firm.
"You're in cash and want to buy stocks, and you're looking at a market that isn't going down," he said. "You start chasing it."
A separate report from the Commerce Department showed sales of new homes in August rebounded slightly from the lowest level on records dating back to 1963 in July. Sales rose 4.3 percent.
The modest rise in sales followed a similar report Thursday that showed sales of previously occupied homes rose in August from depressed levels in July. Sales plummeted in the months after a home buyer tax credit expired at the end of April, but analysts are becoming hopeful that the beleaguered housing market may be bottoming out.
Nike rose $1.90 or 2.5 percent, to $79.57. GE rose 52 cents, or 3.2 percent, to $16.46, while Caterpillar jumped $3.47, or 4.6 percent, to $79.73. United Technologies shares rose $1.70, or 2.4 percent, to $71.50.
Bond prices fell after the durable goods orders report. The yield on the 10-year Treasury note, which is used to set interest rates on loans, rose to 2.61 percent from 2.55 percent late Thursday.
About five stocks rose for every one that fell on the New York Stock Exchange, where consolidated volume came to 4.2 billion shares.