Strong results from multinational industrial firms Caterpillar Inc. and Honeywell Inc. also helped to ease concerns about growth. Crude-oil prices closed well above $116 a barrel and also fueled strong gains for the energy sector.
"The news out of Citigroup wasn't terrific but [was] not as bad as expected," said Paul Nolte, director of investments at Hinsdale Associates. "The market is looking at this as being halfway through, or maybe more than halfway through, the problems for financials."
The Dow Jones Industrial Average gained 228 points, or 1.8%, to 12,849, topping its Feb. 1 intraday high of 12,841.
For the week, the Dow advanced 4.3%.
Banking giant Citigroup posted a first-quarter loss of $1.02 a share, worse than the loss of 95 cents expected by analysts, but its revenue exceeded expectations.
The firm also took write-downs and other losses totaling about $12 billion and reiterated a promise to continue divesting non-core assets.
Yet, the company's shares jumped 4.5%, with the market having already priced in a lot of the pain for the bank and for much of the ailing financial sector as a whole.
Citigroup's advance followed solid gains scored Thursday by Merrill Lynch after it missed forecasts but said it remains well capitalized.
The S&P 500 index gained 24 points, or 1.8%, to 1,390, advancing 4.3% for the week. The Nasdaq Composite rose 61 points, or 2.6%, to 2,402, surging a whopping 4.9% on the week.
Trading volumes showed 1.5 billion shares exchanging hands on the New York Stock Exchange, where gainers topped decliners by 4 to 1. On the Nasdaq, 989 million shares traded, with gainers topping decliners by 3 to 1.
The Dow also received strong support from upbeat results at equipment-maker Caterpillar Inc. , which saw its shares jump 8.5%.
Away from the Dow, fellow industrial firm Honeywell Inc. rose 6.2%.
"We're getting strong results from companies that have a bigger exposure internationally and don't have the same financial exposure that GE has," Nolte said.
Last week, the market was shocked by General Electric Co.'s surprise loss, which was largely due to the international conglomerate's financial businesses in the U.S.
Google's tech boost
Google shares surged 20% after the Internet giant posted a 31% rise in first-quarter profit to $1.31 billion late Thursday and said growth in paid clicks -- or the number of times users click on sponsored links -- was much higher than recent speculation had suggested.
With little on the economic calendar, the dollar posted solid gains on the back of Citigroup's results, adding 0.9% against a basket of major currencies.
A firmer dollar pressured commodities, but not commodities-related stocks, which joined the broader rally on Wall Street.
Oil prices reversed morning losses lower, with the May-dated light crude contract surging to a new high of $116.69 a barrel amid supply disruptions in Nigeria. Crude went on to trade at $117 a barrel in electronic trading.
Overnight, Japan's Nikkei 225 Average finished 0.6% higher Friday, bucking a broadly lower trend in Asia, while European markets closed higher.
By Nick Godt