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Despite the day's gains, the three major American equity averages posted their third consecutive losing week.
Markets were anticipating the European Central Bank will cut rates in September and resume a bond-buying program, according to Reuters. And add Mexico as the latest country to cut interest rates overnight.
The major European equity averages closed higher on expectations of monetary stimulus.
In the U.S. industrial shares helped lead gainers. Deere & Co., which missed quarterly profit estimates, said it was beginning a review of its costs in a bid to reduce expenses and boost its bottom line. Investors rewarded the company by bidding up its shares.
|DE||DEERE & COMPANY||163.99||-0.60||-0.36%|
|GE||GENERAL ELECTRIC COMPANY||9.36||-0.02||-0.21%|
General Electric shares rose as Chief Executive Officer Larry Culp bought nearly $2 million worth of shares a day after recording their biggest one-day percentage fall in 11 years.
Shares of Wabtec, a rail and transportation conglomerate, jumped.
Wall Street's risk-on mood lifted bond yields, which boosted bank stocks. The yield on the 10-year Treasury jumped to 1.55 percent. Treasury yields move in the opposite direction of their prices.
|BAC||BANK OF AMERICA CORP.||29.94||-0.19||-0.63%|
|JPM||JP MORGAN CHASE & CO.||118.57||-0.59||-0.50%|
|WFC||WELLS FARGO & COMPANY||48.76||-0.22||-0.45%|
On the economic front on Friday, the Commerce Department said U.S. homebuilding fell for a third straight month in July amid a steep decline in the construction of multi-family housing units, but permits rose creating optimism. Housing starts dropped 4 percent to a seasonally adjusted annual rate of 1.191 million units last month.
Investors have suffered whiplash this week after the U.S. yield curve -- the difference between yields on the U.S. 10-year and 2-year Treasury bonds -- inverted for the first time since 2007. It has historically been an accurate forecaster of a coming recession.
The major U.S. stock indexes spent much of the day reacting to big moves in U.S. government bond yields, which fell sharply in the early going, fluctuated for much of the day, and then recovered some of their decline by mid-afternoon.
Stocks are down more than 2.4 percent this week and are on course for their third consecutive losing week.
The U.S.-China trade war has hammered American manufacturers and roiled global financial markets with fears that the world's largest economy could slip into a recession. Yet most analysts expect the U.S. economy to power through the rough patch, at least in the coming months, on the strength of solid consumer spending and a resilient job market.
Japan's Nikkei rebounded from early losses to gain 0.1 percent, Hong Kong's Hang Seng added 0.9 percent and China's Shanghai Composite gained 0.3 percent.
The Associated Press contributed to this article.